The Real Cost of Home Buying

Prospective home buyers should engage in extensive browsing, secure a legitimate pre-approval, and thoroughly understand both upfront and ongoing costs to make informed and affordable decisions.

• Begin house hunting with open-ended browsing to define preferences and effectively communicate with your agent.

• Secure a full, legitimate mortgage pre-approval from a lender to determine realistic borrowing capacity.

• Thoroughly calculate all upfront costs and ongoing monthly expenses, including potentially high association dues.

Purchasing a home requires careful preparation beyond simply finding properties; it involves strategic browsing to refine preferences and obtaining a legitimate pre-approval from a lender to understand realistic affordability. Buyers must also run their own numbers to factor in personal financial goals and fully account for all upfront costs like down payments and closing costs, as well as ongoing monthly expenses like principal, interest, taxes, insurance, and potentially high association dues.

Strategic Home Browsing

• 00:00:00 Browsing available homes online or attending open houses is a valuable initial step in the home-buying process, allowing buyers to identify realistic options and communicate preferences to their realtor. This early engagement helps real estate agents curate suitable properties more effectively, preventing wasted time and ensuring a more focused search when the buyer is ready to make an offer. Transparency with the agent about specific 'must-haves' during this exploratory phase ensures a better match for the buyer's needs.

Securing Legitimate Pre-Approval

• 00:01:43 Obtaining a legitimate pre-approval, not just a superficial online questionnaire, is crucial for understanding true affordability and being prepared for competitive real estate markets. This process requires a borrower to work directly with a bank or lender, providing detailed financial documents like pay stubs and tax returns for a thorough underwriting. This in-depth assessment offers an accurate representation of available financing, enabling quick action when a suitable property is found and ensuring transparency between buyer and lender.

Understanding Home Buying Costs

• 00:04:45 Home buyers must understand two main categories of costs: upfront and ongoing monthly expenses. Upfront costs include down payments (3-20% of the purchase price), closing costs (around 3% of the purchase price, which may not always be covered by the seller), and immediate maintenance and furnishing expenses for things like paint, carpet, or basic household items. Thorough research is essential to anticipate these initial financial demands and prevent unexpected out-of-pocket expenses.

Factoring in Ongoing Monthly Expenses

• 00:07:08 Ongoing monthly costs are a critical component of home affordability and extend beyond the typical mortgage payment components of principal, interest, taxes, and insurance (PITI). It is essential to factor in association dues (A), such as HOA or condo fees, which can significantly impact cash flow and overall affordability, sometimes reaching hundreds of dollars monthly with no additional amenities. Buyers must be comfortable with current interest rates, rather than speculating on future rate drops, to ensure the monthly payment is sustainable for their budget.