Category: Mortgages

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How much home can I afford?

How much can I reasonably spend on a home? This is a question every single prospective homeowner asks before purchasing a house, and this is exactly what we want them to be asking! While buying a home is a great financial investment to start building equity and wealth, no one wants to be house poor. Create a budget for yourself by using the tips below or jump straight to our mortgage calculator. 

Save for a Down Payment and Closing Costs 

A down payment on a house is what you pay for the home up front. The larger down payment you can do, the lower your loan amount will be. Not only does a large down payment lower monthly mortgage bills, but it cuts the amount of interest you pay on the home loan over time. 

Many loan programs allow first-time homeowners to buy a house with zero money down. This is a great option for some homebuyers, but many decide not to take this route because they end up spending more money on interest over a longer period of time. 

Another upfront expense to purchasing a home is the cost to close the deal, aka the closing costs. Many first-time buyers forget to save for the additional fees that are required on top of your down payment. Fees to consider are: 

  • Loan origination fees 
  • Appraisal and survey fees 
  • Title insurance 
  • Homeowners insurance 
  • Private mortgage insurance (PMI) 
  • Mortgage points 
  • Property tax (typically 6 months of property taxes) 
  • Escrow fee to the agent who helps you close  
  • Attorney fees 
  • Miscellaneous fees 

Down payments are typically 5-10% of the house cost (20% is ideal) and closing costs are typically 3-5%. So, keep that in mind when saving for your dream home! 

Add Up Your Monthly Expenses 

Most home loans are meant to be paid off over a thirty-year period, making your mortgage payment a monthly expense. Before you decide on a budget for your new home, you need to add up your current monthly expenses to determine how much of your monthly income is left for your mortgage. Monthly expenses include: 

  • Monthly bills 
  • Loan payments 
  • Food 
  • Subscriptions 
  • Childcare 
  • Etc. 

If you have not received a raise or started bringing in supplemental income since your previous home purchase, but you want a bigger house, you’ll need to pay a larger down payment. The larger your down payment is, the less your monthly mortgage payment will be. Obviously, if you’re making more money these days then you have more monthly income for a mortgage payment. 

Calculate Your DTI 

Your debt-to-income ratio is also vital to consider when establishing your home budget. Similar to adding up your monthly expenses, DTI is the total amount of monthly debt you have compared to your pre-tax income. The lower your DTI, the more home you can afford.  

A recommended DTI is 28% of your monthly income or lower. To calculate the DTI you should aim for, use this formula: monthly income x 0.28 = DTI. Once you pay off enough debt to reach that DTI, you are likely to get approved for a better loan, depending on your monthly expenses that are in addition to debt. 

Get Your Current Home Appraised 

If you currently own a home and you’re planning to purchase a new one, it’s a smart idea to get your current home appraised. Knowing the value of your home can help you predict how much money you’ll make from it. Homeowners in the market to buy a new home often use that surplus to pay for the down payment and closing costs on the new home. 

Have more questions about how you can afford your dream home? Reach out to our friendly and helpful mortgage lenders today! 

Peoples Bank & Trust Co.

Member FDIC

Equal Housing Lender

NMLS #407724

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Home Buying 101

Becoming a homeowner for the first time is no easy task! You’ve probably heard horror stories from friends about overpaying or missing a crucial piece of information before committing to an offer. Here are a few tips to help you prepare for buying your first (or next) home so you feel confident in the home you choose to buy! 

Before You Buy 

  • Start Saving Early – the earlier you start saving, the better! Many first-time homeowners assume they just need to save for a down payment, but home buyers must also pay closing costs up front! Closing costs include the down payment, title insurance, homeowner’s insurance, property tax, closing or escrow fee and others depending on your lender. Plus, the larger your down payment, the less you’ll pay in interest as you pay off the home loan. 
     
  • Strengthen Your Credit Score – if you know you’re going to purchase a house in the next few years, it’s a good idea to take action to earn a higher credit score. Start by making sure your bills are paid on time, pay off debt you have and keep credit card balances low. 
     
  • Learn About Mortgage Options – there are several different mortgage options to look into before you commit to a home loan. These include conventional loans, Federal Housing Administration (FHA) loans, U.S. Department of Agriculture (USDA) loans and loans from the Department of Federal Affairs. 
     
  • Find First-Time Home Buyer Programs – many states will assist with your down payment! Check with us to see what programs we recommend. 
     
  • Decide How Much You Can Afford – it’s a good idea to set your budget before you start shopping or get pre-approved for a home loan. Check out this tool from NerdWallet to see how much house you can afford.  

While You Look for the Perfect Home 

  • Get Pre-Approved – ask your lender to draft a pre-approval letter to send to a potential seller when you’re ready. If it’s all sorted out beforehand, you can put an offer in on your dream house quickly. 
     
  • Don’t Look at Houses Over Your Budget – this is a great rule of thumb for sticking to any budget, don’t look at what you can’t afford! You don’t want to fall in love with something that’s not realistic for your income level and prior financial commitments. 
     
  • Create a Priority List – decide what home features are important to you. This will help you weigh the pros and cons of each house. For example, if an office space is more important to you than having a large backyard, you’ll be able to narrow down your search easier. 

When You’re Ready to Make an Offer 

  • Pay for an Inspection – not only do inspections help you negotiate the price of a home down, but they also help you know what you’re paying for.  
     
  • Negotiate with the Seller – don’t be afraid to negotiate! In most instances, the worst-case scenario is that the seller will come back with a counteroffer. 
     
  • Buy the Right Home Insurance – home insurance covers the cost to repair or replace your home and belongings if they’re damaged by an incident covered in the policy. It also provides liability insurance if you’re held responsible for an injury or accident. Buy enough home insurance to cover the cost of rebuilding the home if it’s destroyed. 

If you’re in the market to buy a home, reach out to us! We’re here to help you find the right home loan for your budget. 

Peoples Bank & Trust Co.

Member FDIC

Equal Housing Lender

NMLS# 407724

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How much money do I need to buy a home?

With rates continuing to be low, now is a great time to purchase a home! It may seem daunting at first, but it’s a great experience and can be fun if you are prepared. Whether you are a first-time homebuyer or have purchased a home before, keep reading to see how much money you need to buy a home. 

You may not need the full loan amount offered. 

While you can get a loan for a large amount of money, you may not want to get that full amount. Think about all of your other expenses first and the salary you make. Be sure to break it all down and make sure the monthly payment isn’t going to be too much when everything else is added on. 

Think about the upfront costs. 

Closing costs can be around three to four percent of your loan or more and it’s nice to try to have a down payment anywhere from ten to twenty percent. If you want to avoid paying additional private mortgage insurance (PMI), you’re looking at a twenty percent down payment. Here are some of the items included in closing costs: 

  • Application fee 
  • Appraisal fee 
  • Title search 
  • Title insurance 
  • Attorney fees 
  • Home inspection 

These are large upfront costs so it’s important to factor them in and begin saving for them. If you work on saving at least twenty five percent of the sale of the home, then you’d be in a good place to cover the down payment, closing costs, moving fees and so forth. You can try to negotiate that the seller pays for your closing costs which could help save you some money – your realtor can help you know if this is a good option or not depending on the circumstances of the area and home. 

Make note of utility, insurance and tax increases. 

If you are moving to a new area, even if it’s across town, utilities, taxes and home insurance prices could all be different than what you currently pay. Be sure you’ve calculated this into your monthly payments as well because it could be a couple hundred dollars more than what you are paying now depending on the new home you are looking at and the area it’s in. 

Ask your bank questions so you fully understand what the costs will be. 

If you have any additional questions, or just don’t fully understand what you’d potentially have to pay upfront vs monthly and when those payments would start, ask your bank. We are here for a reason – to help you and create a smooth home buying journey. Our mortgage options suit any need so contact us today with your questions and concerns so we can help put your mind at ease! 

Peoples Bank & Trust Co.

Member FDIC

Equal Housing Lender

NMLS #407724

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4 Steps to Home Buying

Whether you’ve been looking for a while or have just decided to begin the hunt, buying a home is an exciting adventure! With rates so low, it’s the perfect time to become a new homeowner. But do you know some of the things you should be doing before stumbling upon your dream home? We’re here to explain our top four steps to home buying so you can enjoy the journey. 

Know How Much You Can Afford 

Even though you could get a loan for $300,000, this may not mean you want to spend that much on a home. Go through your current debts, what equity you’d get back on your home, your salaries, monthly bills and expenses to know how much money you spend each month. Then calculate what your new mortgage would potentially be (including taxes, insurance and utilities as those may change) to know how much you are comfortable spending each month while allowing room for savings. This will help give you a final number you are truly comfortable spending, so you don’t go over your max when making an offer. 

You will also want to think about closing costs and the down payment. Closing costs are normally around 3% of your loan and it’s nice to try to have a down payment of 10-20%. These are large upfront costs so it’s important to factor them in and begin saving for them. 

Get Pre-Approved 

You may begin your search and think you’re in no rush – but what if you come across the perfect home and there’s already offers that could potentially be coming in? You want to make sure everything is lined up so you can put an offer in right away to get ahead of others. Waiting a whole day to meet with your bank and go over finances could cost you that slot that would get you to owning your dream home. You need to know how much you can actually afford, if you need the sale to be contingent on your home selling and so on. We can help you manage all of this and get you pre-approved for a mortgage. 

Don’t Just Look on Home Sites 

Don’t just wait to see a home on a website like Realtor.com or Zillow. You want to check Facebook and follow realtors there as they may post a home before it becomes live on the site. You can also ask around if anyone is thinking about selling so you can get your foot in the door first before it goes on the market. The same goes for your realtor – if you want to use a realtor, choose one and make sure they are looking for you to alert you to a home that fits your criteria before it may go on market. 

Get a Home Inspection & Appraisal 

After putting in your offer and getting it accepted, be sure to have an inspection. You’ll want to know everything is running smoothly before you make this big financial decision. You will also need the home to be appraised. A home appraisal is a review that gives the current value of the property you want to buy. You must get an appraisal before you buy a home with a mortgage loan. Lenders require appraisals because they can’t lend out more money than a home is worth. 

Even though this seems like a lot, it will leave you confident in your decision to buy a home. When you have everything above worked out, all you need to focus on is finding a home that fits your needs instead of wondering if you can even afford it. Keep in mind our team can help you with any of the above, so contact us today! 

Peoples Bank & Trust Co.

Member FDIC

Equal Housing Lender

NMLS #407724

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Homeowner Costs People Forget About

Are you thinking about taking the big step of becoming a homeowner? Purchasing your first house is a significant and exciting change, but it can be easy to get caught up in the excitement and forget about certain costs. If you want to make sure you have all of your financial bases covered before owning a house, keep reading!

Lawn Upkeep

The cost of maintaining a lawn is one people often underestimate. Whether you hire someone to keep your lawn looking fresh or decide to do it yourself, it will cost some money. Besides needing a lawn mower for cutting your grass, keep in mind things like pest control, weed killer, fertilizer and landscape. Some other equipment needed in lawn upkeep includes a hose, sprinkler, rake, weed wacker, trimmers and much more.

Keeping it Clean

Keeping a house clean is much more challenging and costly than cleaning a small apartment. Many families not only add onto their collection of cleaning supplies, but usually double almost all of the supplies they own. It may sound unnecessary, but once you have to start making trips up and down stairs to clean different levels of the house, you might want to double your supplies, too. 

Property Taxes

One of the biggest payment differences between paying rent for an apartment and paying a house mortgage is property tax. It’s important to figure this out beforehand and add it to your estimated monthly payment so you know what to expect. To get a general idea of how much you’d be spending in property taxes, use an online property tax estimator.

Immediate Renovations

After buying a house, it’s normal to want to turn that house into a home. Homeowners are constantly looking for things to improve, like redoing the kitchen cabinets, fixing the deck, changing the wall colors, finding a new floor you love… the list goes on. Keep in mind when house hunting what you’d want to change about the houses you look at and add this to the list when considering your expenses.

Time

This one seems obvious, and although this particular cost won’t be coming out of your pocket, it’s a very important component to consider. Owning a house means doing everything yourself – something you didn’t always have to do while living in an apartment. Keeping up with maintenance, dealing with pest control and tending to the lawn are some of the many time-consuming things that come with being a homeowner. 

Now that you’ve considered some of the unexpected costs of owning a house, you’re able to make a more informed decision on if taking this step is the right choice for you right now. We offer mortgages that will help your homeowner journey become a little smoother.

Peoples Bank & Trust Co.

Member FDIC

Equal Housing Lender

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6 Tips to Budget for a Home Remodel

Sticking to a budget is always a challenge, especially if it comes to a remodel within your home. That’s why we’re here to give you the structure you need for your newest renovation. Pull out the hammer and get ready for your home remodel the right way with these 6 budgeting tips.

Prioritize

What needs to get done first or what has been bugging you the most? Start there. That will be your first update and then go from here. You’ll need to know how much is too much, which means if you want new kitchen cabinets, are you getting a new countertop and floors too? Know where you will decide to end the project. You’ll also want to prioritize your materials. Think about cheaper alternatives and what items you must have. Do you want granite countertops, or is laminate okay?

Create a Detailed Plan

Know exactly where you’re going to start, what items you need for each update and how you will get it accomplished. Will you buy the materials yourself or do you need a contractor for certain areas? This will lead you to creating a detailed plan with cost estimates. You’ll want to know a ballpark of what everything will cost, as going into it with no estimate in mind could leave you with a bigger hole in your wallet than expected.

Talk to Multiple Contractors

Don’t talk to one and be done. Speak with multiple contractors to see what their prices are and what they can do. Be sure to check them out to know if they offer quality work and are trustworthy. This person will be building a piece of your home, so you want to make sure you pick the right one and get a decent price.

Set A Budget

Do not allow yourself to go over budget. Do your research and know an approximate estimate from your detailed plan, so you aren’t surprised by anything. Calculate your income, expenses, loans and so on to know what you can truly afford. It’s easy to get carried away with the renovation once you start, so your budget will help you remain practical.

Stick To The Plan

As mentioned above, do not stray from your well-calculated plan and budget. You’ve done all the research, so it’d be sad to let it all go down the drain. New appliances or lighting can wait – so know your plan and be honest with yourself about what you mapped out you could afford. 

Account For Hidden Costs

You will run into things that will end up costing more than expected – don’t worry! This is why you made your plan. Within your plan, you should have picked a few things you could wait on if something more urgent came up. Know what you can trim from your original plan and budget in order to account for these hidden costs.

Congratulations on creating your plan and budget! Your home will look beautiful once the renovations are made, so be sure to get started the right way with these top tips.

Peoples Bank & Trust Co.

Member FDIC

Equal Housing Lender

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Budgeting Checklist for Buying Your First Home

Buying your first home can be an exciting, but overwhelming experience. With the right bank and agent, most of the hassle should be taken off your shoulders. So now, it’s time to make sure you’re checking these items off your list to allow for a smooth house buying journey – without breaking the bank.

Check Your Credit Score

This is always one of the top points on anyone’s list. Making sure your credit score is high and on the rise will allow you the opportunity for better rates! Look for any issues with your report and contact the credit bureau to get them fixed.

Gather Your Documentation

You’ll need to get your documents in order when coming to the bank to discuss a pre-approval letter and loan. To help you get started, you should plan to have the following documents when applying – but contact us to find out if there’s anything else you’ll need in advance: 

  • Income verification/employment – Last two years’ tax returns, W-2s, 1099s and your last few pay stubs
  • Credit/ID – Drivers’ license, Social Security card or acceptable alternatives
  • Financial condition – Bank and brokerage account statements including retirement accounts, proof of funds to close or a gift letter (if your down payment is coming from a gift)

Secure Pre-approval

Having a pre-approval letter shows a buyer you are serious and have the funds to afford the home. This also lets you know how much home you can afford, so you don’t start hunting for houses that are out of your budget.

Decide On Your Max

Even if you can afford a certain amount, not spending it all may be wise. Scale back a little and decide on the price you’re willing to spend and hold yourself accountable to not pass that limit.

Think Of Additional Expenses

Repairs, maintenance, monthly bills, moving costs and closing costs will all factor into your budget. Know how much income you are making each month and subtract all of these costs, as well as other items like gas, groceries, loans and so forth. This will show you how much you’ll actually have left over to put towards your mortgage payments. Deciding on your max budget will only help you – instead of spending the full amount you may actually be able to afford.

We hope this checklist reminds you of the items you need to complete and think of to help you stay within your budget. If you’re looking for a great place to get your mortgage, we’re here for you! Contact us or stop on in to allow us to help you on the path to buying your dream home!

Peoples Bank & Trust Co.

Member FDIC

Equal Housing Lender

NMLS# 407724

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8 Surprising Costs of Buying a Home You Need to Budget For

Buying your first home is so exciting. It can also be a little nerve wracking the first time around if you don’t have any guidance. Here’s what you should know about the home buying process before, so you aren’t shocked by the expenses that come along.

The Appraisal

An appraisal is when you have a home expert come and determine the value of a home. They have no stake in the outcome of their conclusion, so you can expect an honest answer. You will want to be sure to have an appraisal completed to ensure that you are not paying more for the home than what it is worth. This can cost upwards of $600 and should be factored into your budget.

Home Inspections

Some get appraisals and home inspections confused. They are both important, but the home inspections are more tailored to your needs and may help to answer some of your questions about the conditions of the home. By getting an inspection, you are able to have a better understanding of the home’s condition. This can cost an average of $300.

Closing Costs

Sometimes, you may be able to convince the seller to pay the closing costs. Yet this isn’t something that should be relied on. Closing costs cost an average of 2-5% of the value of the home’s purchase price. It includes costs such as loan fees, taxes and title searches.

Homeowner’s Insurance

If you’ve rented prior to this, you may be new to fire insurance or more commonly known as homeowner’s insurance. It differs from rental insurance, as that covers your liability and personal items, while homeowner’s insurance also covers the physical structure of a home. The average cost for this is $1,500 a year.

Home Maintenance

The nice part of renting is that you aren’t responsible for home maintenance. Surprisingly, many are unprepared for the maintenance that comes with home ownership and how this can create additional expenses. You are going to need to buy basic items like a lawnmower, snow blower and a leaf blower.

Cleaning

If the prior owners hadn’t cleaned, you may have an additional expense of getting the carpets cleaned before you move in. Carpets should be professionally cleaned once a year, so if they haven’t been cleaned immediately prior to your move in, you may want to schedule a cleaning. This can cost $300 for a 1,500 square foot space.

Homeowners Association Fees

A homeowner’s association is a part of an organization that enforces rules and regulations for your property. They charge a fee for the upkeep of the property in addition to shared services among the community. These are typically due at closing, but you should be aware that the average HOA fees increase by 5% each year.

The Big Move

Often forgotten or not factored, is the move itself. Moving is an expensive business, especially if it’s across state lines. You will need to figure in the costs of movers, moving materials and transportation. These usually cost an average of $3,000.

Budgeting for these costs will allow you to have a correct price in mind when house hunting. Our team offers great insight into our mortgage products. Discover more today!

Peoples Bank & Trust Co.

Member FDIC

Equal Housing Lender

NMLS #407724

home

4 Ways to Stay Within Your Budget When Buying a Home

The weather is beautiful and homes are popping up for sale everywhere! If you’re on the hunt for your next house, it’s important not to bust your budget. Luckily, we’ve compiled some great ways that can help you stay within your budget when buying a home.

Have 20% Saved for the Down Payment

While you don’t need 20% saved in order to actually buy a home, there are plenty of benefits that come along with it. In total, you’ll pay less for your home since you’re avoiding interest being applied to a higher cost. You’ll also potentially get a lower mortgage loan interest rate because making a higher down payment is a sign that you’re stable financially, and thus are a good credit risk. Finally, this can help you avoid paying private mortgage insurance.

In 2016, the average home down payment was 11% according to the National Association of Realtors. Younger home buyers ages 35 and under, who usually have lower incomes than people in their 40’s and 50’s, put down 8% on average for home down payments in the same time period. If you can’t afford 20%, it’s okay – but try to work your way towards that goal!

Raise Your Credit Score

The balance on your credit cards vs the credit limit is called your credit utilization ratio. This ratio accounts for 30% of your overall FICO score. By paying off your cards, your credit score will raise and allow for a better loan. It’s also important to know that new accounts and hard inquiries make up 10% of your credit score. When you open a new account, your credit score will drop for a couple months. When you know you’re going to be applying for a mortgage in the near future, it’s best to hold off on buying that new car or applying for a different credit card.

Earn More Money

There are plenty of ways to earn more cash! If you want to stay within your budget, finding ways to add more savings to the pile can help with that goal. You can take money from your IRA without the 10% early withdrawal penalty when you use the money for a home. There are also other solutions that won’t take from your retirement savings, such as getting a second job or hunting for a new job that will pay more. If none of those options work for you, try hosting a garage sale or selling some lightly used items you don’t need online. You could also find ways to use your talents on the weekends or after work, like being a photographer for weddings and senior photos on the side!

Utilize First-Time Buyer Programs

Exploring local and national first-time home buyer assistance programs is an important step in the journey to homeownership. See what’s available to you to know what your options are.

We believe these top tips will advance your home buying skills and help your budget. If you’re looking for a place to put your savings for your new home, we’re here to help. We also have all the home loan options you’ve been searching for and are happy to talk to you about the next steps!

Peoples Bank & Trust Co.

Member FDIC

Equal Housing Lender

NMLS# 407727

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7 House Buying Tips to Save Money

It’s finally house hunting season and you could not be more excited to get the ball rolling on your big purchase! Before you hit the road or the search bar, take these 7 tips into consideration.

1. Know Your Limits

Before signing the papers or falling in love with the first home you see be realistic about what is in your budget. We recommend spending no more than 25 percent of your monthly income on the mortgage. When you know what this number is, be sure to stick with homes in that price range. Don’t even go into homes that are going to be proportionately out of that limit, or you may kick yourself later as you feel straddled with a home you can’t afford.

2. Be Realistic About Fixer Uppers

While they are fun to watch on TV, if you don’t have the skillset to actually fix homes, a house that needs a lot of TLC is likely not for you. Many see a low price on a home and jump on it, thinking the work needed will be minimal and easy. When it comes to home improvement, no fix is simple and this is even more true if you are a newbie to the renovation game. Often people do not realize the time commitment and additional cost that come with dramatic improvements.

3. Provide a Strong Down Payment

The more you are able to give for a down payment, the greater equity you will already have in the home in addition to a lower monthly payment. This will save you money on interest in the long run.

4. De-clutter the Current Space

It’s time to spring clean your “extras.” We all have things sitting around our home that go untouched and unneeded. Start selling these items at a local thrift store or posting them for sale online. This will help to make your move easier and be a helpful way to start saving for the down payment!

5. Take Your Time When Shopping

Don’t let the desire to get out of your current living space cloud the judgement of the purchase. Take your time studying each home and realize that this is one of the most important big purchases you will make in your lifetime. It needs to be a thoughtful, decisive purchase.

6. Eliminate Other Debts

Get a great deal on the mortgage by making sure your credit score is in tip-top shape. A large purchase with a loan or credit card right before you buy a home will certainly have an impact on your mortgage rate. Boost your credit score by paying down the debt you have and stay away from any other purchases until after the home is in your possession.

7. Conduct a Personal Roof to Basement Inspection

Know the property backwards and forwards before signing the dotted line. This means hiring a trusted inspector and having a contractor come to confirm the findings. After this, there is still a final step. You need to conduct a thorough inspection to ensure that you know exactly what you are in for. This is a great checks and balances system to confirm that you are getting a fair deal that won’t end up costing you thousands in repairs later.

Be smart with your finances and don’t spend all your money on a “dream home.” We’re here to help you know how much house you can afford, while offering mortgage solutions to fit your needs.

Peoples Bank & Trust Co.

Member FDIC

Equal Housing Lender

NMLS #407724