If you are rich, you don’t need to read the rest of this post. For everyone that is not rich, and thinking about buying a home this spring, please keep reading. First let me pose a question; would you rather live in a house that is almost exactly what you want or would you rather have a house payment that’s lowered by about $100 per month?
Here is the reason why I ask that question. I think that too often buyers get caught up in making sure they have the lowest house payment possible. In many cases to help achieve this, buyers will put down more money at closing which reduces the amount financed. While this can certainly be a good idea, I want to examine what may be sacrificed; the enjoyment of making your house a home.
I often tell first-time buyers the story of my first home purchase. I targeted a loan amount and payment I wanted and closed without much stress. I was excited to get into the house. It wasn’t long before I wanted to do some improvements; redo the bathroom, refinish kitchen cabinets, put in a privacy fence, widen a doorway … etc., but one thing was missing. I spent most of my money buying the house!
It took me a long time to get some of these projects completed because I had to save money to afford them and by the time I was done with them I only was able to enjoy the house for a short time before I sold it to buy another property.
I encourage buyers to think of everything when buying a home. Think about things like new decorations, paint, landscaping and new furniture. Consider this, would you rather finance money for improvements at a low fixed mortgage rate, or would you rather finance them on a higher variable rate that comes with a credit card purchase?
To do this, consider putting down less money at closing. If you are stretching to put 10, 15 or 20 percent down, don’t do it without working the math through while trying to envision how you want to feel every day when you walk through your front door. By putting less money down, you are financing more but the rate is fixed and way lower than any other finance options.
This strategy could also increase the number of homes you’d be willing to buy, too. In a competitive market, properties that are already updated can easily fetch bidding wars, thus driving up the price. If you were to consider reserving down payment funds for improvements, you could find more homes that aren’t caught up in those bidding wars.
If you’d like to run the numbers and talk about specific scenarios, payments, and options for buying your next home, give me a call at 913-745-7000.
This weekly Sponsored Column is written by Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation.
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