Owning a home is a big financial investment and your current life-stage plays a major role in the decision to buy or sell a home. I’ve worked as a mortgage loan officer for the past 11, and I get a lot of questions about the home ownership process at different stages of life from first-time homebuyers to empty nesters. Here are some of the common client questions and respective answers to help you navigate the journey as a homeowner.
Q: I am thinking about buying a home, but how will I know if I am ready for homeownership?
A: Start asking yourself some key questions. First, why do you want to buy a home? According to the 2016 Bank of America Homebuyer Insights Report, first-time homebuyers are more motivated by aspiration and emotion factors (76 percent) rather than financial factors (63 percent) when making the decision to buy a home. Whether it’s because you want a place to make your own or think that you’re wasting your money on rent, make sure you have a strong reason for starting the home buying process.
Can you reasonably afford a home? This includes the down payment, property taxes, homeowners insurance, moving expenses, furniture, maintenance, etc.? Planning for these expenses carefully can help you avoid one of the most common causes of missed mortgage payments: carrying too much debt. It’s important not to overextend your credit card and other debts so you stay current on your payments.
Is this the right time to buy? Timing plays an important role in buying a home. Do you have a steady career? Do you have a good credit score? Does it make sense to wait and save more money for the down payment or improve your credit? Strengthening your current financial situation may save you thousands of dollars in the long run, but it also means a delay in beginning to build equity in a home.
Q: The kids are all gone, and I have this huge house with tons of unoccupied space. Should I move or stay?
A: They say home is where the heart is. A home represents a physical connection to the past with memories of the people you love, which is why deciding whether to stay or leave is not any easy choice. Here are a couple of things to consider.
Maintenance can get expensive. Remember that the house ages along with its occupants. Will you be able to manage the repairs and maintenance that the house may need and the costs that come along with it?
If the cost of maintaining your home isn’t a concern, then consider your changing physical needs as you age. Would stairs in a two story home be a concern in the future? Would it be easier to get around in a smaller house? It’s never fun to think about getting older, but planning ahead could keep you enjoying your home. You might also consider accessing the equity in your home, through a home equity line of credit, to do improvements that would make your home more suitable to your current lifestyle.
Lastly, have you talked to your whole family? Moving will not just affect you, but also your loved ones. They also have a connection to your home, and it’s best to talk openly about all the pros and cons of staying in your house. By involving your loved ones in this big decision, it’s not all on your shoulders.
Q: I am retired and want to help my child buy a home. How can I help and what do I need to know?
A: There are several ways that you can help your children with buying a home, but it will depend on how much help you want to give them. You can gift your children money for the down payment, be a co-signer on the mortgage with them, or buy the home yourself and rent it to them.
However, there are many factors to consider when deciding which route you will take. For example, down payment gifts will require additional paperwork since mortgage lenders will need to verify the gift and may even ask for your bank statements. Also, keep in mind that you could get taxed for your gift.
With all these options, you should consult experts such as a financial advisor, an accountant or lawyer to make sure you can comfortably afford to help without jeopardizing your personal financial security, understand the potential tax implications, and how to structure the legal paperwork if necessary.
Most importantly, it is imperative that you as a parent never compromise your ability to pay your own bills or meet your own mortgage payments for the sake of your children. Have an honest conversation with them on how you can realistically help and be clear on how you plan on doing it.
Darryl Staggers is a mortgage loan officer at Bank of America and has been helping home buyers for
11 years.
