If there’s one thing synonymous with spring (besides warm weather and moving time forward), it’s tax season. Yes, we all love receiving those W2 forms in the mail, especially when we’re getting something back. While some of us already have things in mind, most are looking toward vacations, maybe catching up on bills or buying a new car. Some, on the other hand, are looking to visit a realtor office.
Buying a new house or even thinking of doing so means setting your sights on one of the most important purchases you’ll ever make in your lifetime. It’s a purchase that will increase value over time compared to other purchases, which typically diminish as time goes by.
According to Realtor.com, spring is one of the busiest home-selling and home-buying periods of the year. If you’re on the market, or plan to be, below are some helpful tips to make the process easier when factoring in many variables.
Come to Valley Federal Credit Union and ask us about our home equity loans and rates. We have offices in Brownsville and Harlingen!
What is a Home Equity Loan?
At Valley Federal Credit Union, we understand that loans and home borrowing options can be overwhelming. We get frequent questions such as, “What is a home equity loan?” and “What is home equity?”
We’re here to help you make the best decisions when it comes to home equity and how it can help you find more financial resources without using other funds, such as your savings. So, what it home equity? Well, it’s basically the appraised value of your home and the rest you have left off to pay (your mortgage).
- The appraised value on your home is $130,000.
- You have paid $30,000.
- The balance you currently owe on your mortgage is $100,000.
- The appraised value ($130,000) minus the amount owed ($100,000) equals the equity amount ($30,000).
Over time, the equity amount may change as your home value increases. You might have made some improvements that increase the value, or the rankings of your closest school district could go up.
Why a Home Equity Loan?
Home equity loans are also called second mortgages. They can be helpful when you might need a loan but don’t want to tap into your savings account. They’re helpful if you want to:
- Cover home improvements
- Fund a large purchase
- Have some extra money for an emergency
- Pay for a child’s college education
Before thinking about a home equity loan, you must be a homeowner! Below are some tips when making the big decision on becoming one.
Know the Sleeper Costs
Knowledgeable prospective homebuyers know the hidden costs that come with a new house. That really nice living room that swayed you into buying a home? Yes, it’s going to need furniture like sofas, armchairs, ottomans and some rugs.
Property taxes, homeowner association dues and utilities are also other known costs that can unknowingly creep up on you. Go over your budget and make sure that you’ll be able to handle these costs to avoid headaches and stress, especially when homeownership should be all about joy and comfort. No one wants to walk into a new home with stress baggage.
Don’t Overspend Months Before
It’s bad judgment to make a huge purchase before buying a new house. Lenders find it easier when you’re spending habits are reliable and predictable. Think of them as detectives; they want a perfect paper trail of all of your finances in order to secure the best possible loan for you.
Don’t amass a huge credit card bill or accumulate more debt as they can contribute to having a hard time getting a loan. Make things easier on yourself by limiting expensive purchases before thinking about a mortgage.
Check Your Credit Score
While thinking of furniture will give you a good idea on how your living room will look, knowing your credit score will give you a heads-up on what your mortgage payment will be. Your credit score impacts monthly payments and mortgage rates. According to FICO’s credit score calculator, a homebuyer with a low credit score will receive a higher interest rate compared to someone with a higher credit score. This results in higher monthly payments and a higher loan.
Before Getting Too Excited, Get Pre-Approved
We all love driving around with a realtor while he or she shows us fabulous houses. Yet, the truth of the matter is, many houses can be out of budget. Getting pre-approved for your loan means the lender will already know how much you can afford. It also means being realistic about the best deals on loans and saves you time and energy.
Instead of looking at houses that are out of budget, you could be spending time shopping for some within your financial means. Trust us, it’ll save you the hassle of falling in love with a house that could break your financial heart later.
Hire a Home Inspector
Try before you buy. You wouldn’t buy a car without checking what’s under the hood. Insist on hiring a home inspector before signing your name on the dotted line. Even though the house might look pristine, remember that it’s been dolled up to look nice. Hiring an inspector will help weed out potential flaws before making an offer.
Also, be wary if the relator offers to bring one of “his or her people”. It’s possible they might offer you a subjective opinion since they might be on the relators’ payroll. Offer to hire your own. According to Findlaw.com, homes are sometimes not well-taken care of by homeowners. Clunky furnaces and leaky faucets can lead to surprising costs down the line.
Know Your Neighbors
Once a house has entered your consideration, drive by at night or early in the morning. The worst thing that can happen is buying what seems like the perfect house in what seemed like the perfect neighborhood, only to find out you live next to rowdy neighbors. Talk to some of the residents if possible; get a feel about what kind of community it is. It might be best to start befriending them early since they can always keep an eye out when you’re out of town.
Also, what will the commute be from work to the house, and is it something that’ll be manageable on a daily basis? How far are convenience and grocery stores? What about schools? If you have children, make sure to research the area to determine if the district is good. If you plan to sell later on, being near a good school district will also affect the value of your home.
Organize Your Finances with Us
Even though you might be getting a hefty sum this year, it doesn’t necessarily mean it’s the best time to buy. Forget about preoccupying yourself in trying to figure out when the best time to buy is. The house market fluctuates throughout the year, so begin your search depending on the period.
If you’re on the market on becoming a homeowner, or wondering how Valley Federal Credit Union can help you with your financial planning, contact our credit union in Brownsville by calling 956.546.3108 or feel free to reach out to our other location in Harlingen at 956.425.5668.