BUYER LOAN GUIDANCE

Before buying a house and beginning the search for a new home you need to consider how much house you can afford. This requires knowing your budget, a word that many of us dislike as it requires some work to create. Understanding if you can afford that new house can depend on current debts, income, and your lifestyle. No one wants to be ‘house poor,’ with a beautiful house but no ability to handle unexpected expenses or afford the day-to-day basics.

Determine Your Income 

There is a difference between your gross and net income. Gross is what your employer says they will pay you, net income is what you are actually going to take home after taxes. A good start is to calculate your monthly income, taking into account salary, any bonuses and any other potential income sources, such as child support, alimony etc.   

Calculate Your Debts

What do you currently owe? This may include car payments, student loans, and any credit card debt you are paying off over time. Lenders use a ratio called Debt-to-Income Ratio, and typically they want you to have a ratio of 36% or below including the home loan.

Your Down Payment

People often believe they need 20% as a down payment, but this is no longer true, there are many loan products that require anywhere from 0-20% down. Veteran loans for example can require no down payment at all, then there are FHA, USDA, and many first-time buyer programs that require less and some that even give a grant towards the down payment. These grants can be income driven aimed to help make housing affordable to lower income families. The size of your down payment will impact your monthly payment: a larger down payment reduces the monthly mortgage amount.

Understand Your Mortgage Options

Loan types - you can have a 30-year or a 15-year mortgage, the shorter the mortgage often the lower the rate, as the principal gets paid off quicker and the risk is seen as lower. However, the payment will be higher as more principal gets paid off each month. Then you can consider an adjustable rate mortgage, common in many countries where the rate adjusts at set points during the length of the loan, often with a cap on the highest level of interest. Adjustable rate mortgages can run for 5, 7 or 10 year terms, with the loan being a 30 year repayment term. The alternative is a fixed rate mortgage set for the length of the 15 or 30 year repayment term. Interest rates are affected and set in relation to the bond markets. Then your credit score will also affect the rate you get offered. The higher score you have the lower rate you will be offered as you are considered a lower risk. Before you start looking for a house it is vital to get pre-approved. This allows you to know your purchase limits and what you can afford. If buying a town home with a monthly/yearly Homeowners Association fee this will also affect your monthly payment and affect your mortgage limit.

Ongoing Homeownership Costs   

These are the costs you will pay over time as you own your home, such as property taxes and home insurance. Property taxes are calculated by the county, city and school district in which the home is situated. These can vary widely, so be aware this will affect how much house you can afford to buy. Homeowner insurance rates have been increasing over the last few years as insurers try to recoup the costs of claims from disasters and spread these costs a cross a wider group of insured homes. Some loans such as FHA loans require Private Mortgage Insurance (PMI) and this becomes a part of the monthly payment if you have a smaller down payment. Then there is the cost of home maintenance, usually a rule of thumb is to use 1-3% of the value of the home for maintenance and repairs. This may not be paid out every year, but replacing a roof or a heating system can be expensive even if only done every 20 years or so. When there is a Homeowners Association the monthly fee often takes into account some of the maintenance and repairs, but the lower the fee, often the less they cover. And of course, there is the cost of utilities such as water and sewage fees, heating costs, internet etc.

Using Online Calculators

NerdWallet (https://www.nerdwallet.com) provides an online calculator that provides PMI costs as well. Many banks also provide mortgage calculators and a simple search will give you plenty of options to select from. Much of what we have discussed you will need to calculate, (income, debts, down payment, loan term etc.)

Plan for Your Financial Comfort Zone

Lenders will often give you a limit that you can borrow, but this may not be what makes you feel comfortable or possible depending on your lifestyle. Consider if you want to eat out, plan a vacation etc. You do not need to borrow the maximum. Consider your personal goals, saving for retirement, travel plans, and setting up an Emergency Fund. There are always unexpected expenses, the need for a new car or a growing family. Many financial advisors suggest aiming to keep a cushion of 3-6 months of expenses as an Emergency Fund to protect against a loss of a job, or some other unexpected expense that might arise.  

In conclusion, what you can afford is not just about what a lender says you can borrow, but what makes you feel comfortable financially as well.

If you have any questions about the home buying process, or questions about properties in Flagstaff and northern Arizona, come by our office or call us!

Walnut Canyon, located near Flagstaff, AZ, is a stunning natural formation carved by erosion over millions of years, but it’s the ancient Sinagua people who created the human history of the canyon through their dwellings in and around the canyon, and the Walnut Canyon National Monument.

Natural Formation:

• Geology: Walnut Canyon was formed primarily through the erosive power of water over the course of millions of years. The canyon itself was carved by Walnut Creek, which flows intermittently through the area, cutting through layers of Kaibab limestone and other sedimentary rock. The unique shape of the canyon, with its steep walls and tiered levels, provides natural alcoves and ledges, which later became the sites for human settlement.

Sinagua People:

• Inhabitants: The Sinagua people, a pre-Columbian Native American culture, inhabited Walnut Canyon around 600 to 1400 CE. They were primarily farmers, hunters, and gatherers, and they created the famous cliff dwellings that still exist in the canyon today.
• Cliff Dwellings: The Sinagua built their homes in the natural alcoves along the canyon walls, which offered protection from the elements. These cliff dwellings were constructed using local materials such as limestone and mud mortar. The dwellings are often small, made up of one or two rooms, and were accessed via ladders or steep trails along the canyon walls. The natural overhang of the cliffs provided shade and shelter, creating a suitable living environment in the harsh desert climate.
• Agriculture and Lifestyle: The Sinagua cultivated crops such as corn, beans, and squash on the mesa tops above the canyon, while utilizing the canyon itself for shelter and water access. They also hunted small game, gathered wild plants, and traded with neighboring cultures. The combination of farming on the fertile soil above and the protection offered by the canyon made Walnut Canyon an ideal location for the Sinagua people.

Abandonment:

By the early 1400s, the Sinagua had mysteriously left the region. Scholars believe their departure may have been influenced by environmental changes, resource depletion, or social factors such as interaction with neighboring tribes. Some of the Sinagua people may have integrated with other cultures, such as the Hopi, who have oral traditions linking them to this area.

Walnut Canyon National Monument:

In 1915, Walnut Canyon was designated a national monument by President Woodrow Wilson to preserve the cliff dwellings and protect the cultural and natural history of the canyon. Today, visitors can hike the Island Trail to see the cliff dwellings up close, learning about the lives of the Sinagua people and the natural forces that shaped the canyon. Walking the trail's one mile round-trip provides access to 25 cliff dwellings.

When you are ready to buy or sell in northern Arizona, come by our office in historic downtown Flagstaff. We have Realtors available in person Monday through Saturday to answer any questions you may have about real estate and the area.

Your home isn't simply one of your biggest investments. More than just a physical shelter, it's a space where precious memories are made. But as much as you love your home, there will always come a time when you feel like it's time to move.

According to the National Association of Realtors® 2024 Profile of Home Buyers and Sellers, the median number of years a seller owned their home was ten. Some of the most commonly cited reasons for selling are that the house is either too small or too large or that the neighborhood is becoming less desirable.

While there are a variety of reasons, selling a home is undoubtedly a huge decision - one that will make you reassess your current situation. Maybe it's something you've been considering for a long time as you scrutinize the most recent property listings and daydream about a new house. If you're still on the fence about selling, here's a look at seven telltale signs that it's time to sell your house.

Financial Reasons: 

Home equity, in simpler terms, is the difference between how much your home is worth and the amount you owe on your mortgage. Knowing how much equity you have in your home is usuallly the first step if you are considering selling, as sufficient equity may increase your chances of leaving the sale with a decent profit.

The best way to calculate home equity is to subtract the value of your home from the loan balance. So, how much equity should you have before you sell your house? You want to at least have enough equity to pay off your current mortgage. And if you can make enough profit to cover the 20 percent down payment on your next home so you can avoid paying private mortgage insurance, plus enough to cover closing costs and other moving expenses, then even better.

Aside from your monthly mortgage costs, if you find that rising property taxes, homeowners insurance, and maintenance costs are starting to become unmanageable and have been straining your budget, the next resource may be to sell and find a more affordable home. Selling your home to ease your mortgage burden is a better route than risking foreclosure, especially if you understimated your housing costs.

Lifestyle Changes:  

Changes in your needs and lifestyle can make you rethink your space. If you have a growing family, what might have been a good size when you first moved inot hte house might no longer be the case. Outgrowing your home is an indicator that you need to upsize, especially if you're already in a situation where your kids are crammed into a bedroom or your aging parents need to move in with you. The next logical step is to consider selling your home and buying a bigger one to accomodate this new chapter in your life.

On the other hand, you might need to downsize if your children have all grown up and moved out. It's a simple solution that will not only lessen your maintenance and upkeep costs but also help you save money that can be used for retirement or other investments.

Certain life events, such as death, illness, divorce, or relocation for a new job, can also be significant factors that may warrant a need for a change.

Maintenance is one of the most significant responsibilities associated with homeownership. However, scheduled services such as landscaping, house cleaning, pest prevention, trash removal and recycling, septic service, and even tree or snow removal often come with a hefty price tag, particularly when getting the help of a professional. According to Homeguide, in 2024, the average home maintenance costs range from $4,000 to $22,000 per year, although the cost depends on the home's age, size, location, features, and condition.

If the energy or expenses of keeping up with your home's maintenance is starting to feel more trouble than it's worth, you may want to consider selling and instead buying a lower-maintenance real estate, such as a condo or new construction.

Neighborhood and Market Factors:   

Seeing your beloved neighborhood change as time passes by can have its pros and cons. While changes are to be expected, it can be saddening if your neighborhood changes so much that it already affects your quality of life or displeases you, especially if you've lived in it for a long time. Issues like rising crime rates, unwanted construction, or increased traffic congestion can make you want to relocate. It can also be disheartening to see your closest neighbors move out one by one. These factors are good enough reasons to sell your home and find another neighborhood that will best suit your needs and lifestyle.

When deciding whether it's time to list your home for sale, the state of the property market can also be part of the equation. In a strong seller's market, home generally sell faster for a higher price since the housing demand exceeds supply. Competition among buyers might be higher when your home goes on the market, which means you can probably sell your house for more money and have plenty of offers to choose from.

While it goes without saying that you'd prefer to sell your home when the market is good, 'timing the market' shouldn't be your top priority and should only be one factor.

Personal Readiness:  

Last but not least on this list, you'd want to ensure that you are emotionally ready to sell. The process of selling can be an emotional roller coaster. Are you ready to let go of your personal attachment to the home? Aside from the need to declutter and prepare the home for sale, you also need to prepare yourself for any kind of adverse feedback you may receive from potential buyers. Even if the numbers are all saying that it's time to sell, your psychological preparedness matters as much, so give yourself time.

On the flip side, maybe you already have the next logical step and have the means to do so. Having a solid plan of what comes next makes you ready to move out and leave your beloved place to venture into something new.

Bottom Line:  

Don't get us wrong - the decision to sell your house is still up to you, so take your time deciding if you should sell. Then, reach out to our team so we can help you be completely ready when you decide to move.

Gary Nelson Group

https://www.GaryNelsonGroup.com/

Come see us in historic downtown Flagstaff, or give us a call! We have Realtors onsite and in person, daily Monday through Saturday. Our Executives are knowledgeable about all things Real Estate in northern Arizona!