We all know the Dallas Metroplex market is Hot, Hot, Hot!! With people coming here from California, New York and other areas, it has made buying a home in this area more challenging. I have easily seen home prices increase nearly $100,000 in a 12 month period. So, what does a buyer do?
Obviously, cash is king when it comes to sales, but most of us don't have that much cash unless we robbed a bank, right? So what do you do? First, take a deep breath and be realistic of what you want and where you want it. I get lots of buyers telling me they want a 4 bedroom, 2.5 bath, two story home with about 2700 sq ft for $300,000 in McKinney, Tx. Ummm, maybe three years ago you could. So this isn't realistic. Options? Can you do with one less bedroom? Maybe 2300 sq ft? Or, maybe let's look a little further out from the city.
With many people working remote now, they have the option of moving away from the city and you can get SO much more home for your money. Larger homes, bigger yards and more quiet with less traffic headaches. But what if you have to live in the city for work and you need to have that size of a home?
First, take a look at your finances and talk with your lender about how much you can afford, realistically. The biggest one is debt to income ratio. This will determine how much home you can afford to buy. You may need to wait six months to a year while you pay off some debt so you can increase your purchase price.
Second, is down payment. The larger the down payment, the less your monthly mortgage payment will be. Do you need to put 20% down? No. If you are a conventional loan you can put just 5% down, but it will make your monthly payment higher. You will also have to pay PMI (private mortgage insurance) every month until 20% of the loan is paid off and then it will disappear. If you're FHA then you can put 3.5% down, however, you will have MIP (mortgage insurance premium) for the life of the loan. Your credit score will also play a large part in the loan process. The higher your score, the better interest rate you will have.
Area is another large factor when looking where to purchase a home. Many of my clients love McKinney, but they can no longer afford the home prices here. So, I take them to the smaller cities around McKinney and look at homes that have a more affordable price point. They soon find out that these areas are just as enjoyable and close enough that they can still enjoy the amenities of the larger city. Being flexible when considering location can help relieve a lot of buyer frustration.
A factor that many buyers overlook is how long they truly anticipate being in the home. Most buyers stay in their home about five to seven years and then move again. You really don't want to list your home after being there only two to three years since you may not have the equity needed to purchase your next home. Remember, when selling you need to have enough equity in your home to pay for closing costs, realtor commissions, taxes (if not in escrow), moving company and then closing costs and down payment on the new home.
Have you considered buying a lot and having your home built by a boutique builder? Sometimes these options are much more affordable since you are not paying for the overhead of a large big box builder. In addition, you can get a house plan that works for you and the size you want. There are many websites to buy house plans that fit what you want. If you need something changed, an architect can take those plans and make those minor adjustments for you. Love the floor plan, but it's 1000 sq ft more than what you need? Just change the room sizes to a smaller version and you now have the same gorgeous home at a more reasonable price. Voila!!
But most of all, communicate with your Realtor! We are here to help you, but we can't if you don't tell us what you really want or need. It's a great idea to sit down together and really look at the entire picture so everyone is on the same page. Be realistic, be patient, be understanding. Purchasing a home is huge! It's the largest purchase of your life. Take the time to understand it, ask questions, look at all the options and reach out to your Realtor for answers. Remember, we work for you.
Kristine Edens, REALTOR
JPAR - McKinney
Making Your Dreams A Reality