Buying a home later in life is often an excellent financial decision. Particularly for veterans, who may qualify for special programs, buying a home offers more security and comfort than renting. From establishing a budget to finding the right home and securing a loan, these steps will help prepare you for buying a home to enjoy throughout your golden years.
Determine How Much Home You Can Afford
Calculating how much house you can afford involves factoring in your annual income, down payment costs, and your monthly budget. You also need to consider the mortgage type and the current average APR for the loan you receive.
According to Forbes, lenders cannot approve a mortgage that costs more than 35 percent of your income per month. Some lenders adhere to a stricter maximum of 28 percent, which is what Forbes recommends for pre-purchase calculations.
Add up your monthly expenses to determine a feasible budget. Using the 28 percent estimate is preferable since it helps keep your expenses low and prevents you from overextending your income. Even on a limited budget, such as retirement pay or disability/Social Security payments, you can still qualify for a home loan. The key is working within your financial means to reduce your monthly costs and work toward purchasing a home. Apart from recurring bills, you also need to factor in real estate costs such as appraisal charges, credit check or application fees, title insurance amounts, and document preparation expenses. Fortunately, these are one-time costs and don’t factor into your mortgage payment.
Finding the Right Home
Once you have an idea of what you can afford, you can use a mortgage calculator to calculate the corresponding home value. Ultimately, your expenses will depend on the mortgage APR, the down payment costs, and additional, often variable, charges like PMI and taxes.
After you have a figure in mind, you can begin your search for a suitable home. Keep in mind the potential for negotiating with a seller, but you should avoid looking at properties that are too far outside of your comfortable price range.
Depending on market conditions, Realtor.com explains, you might get away with submitting an offer 10 percent below asking price and getting a great deal. The longer a property remains on the market with few or no offers, the better the odds the seller will accept a lower price.
Obtaining Professional Advice
You might expect your realtor to offer all the homebuying expertise you might require. However, it’s not always wise to rely on a single professional for advice. Because there is a wide range of programs available for seniors and veterans, you shouldn’t expect your realtor — or even your mortgage lender — to know about all of them.
Consider obtaining professional advice before agreeing to a mortgage lender’s terms or committing to buy a particular property. Financial advising professionals can help you prepare for the costs of homeownership, whereas an appraiser can tell you the true value of your prospective purchase. Employing professionals isn’t always cheap, but it may be a worthwhile investment if it helps you to get an excellent deal on your new home.
Special Programs for Veterans
While a conventional loan requires a 20 percent down payment and a potentially high APR, veterans and first-time homebuyers have other options to explore. The US Department of Housing and Urban Development (HUD) maintains a list of local homebuying programs per state that can help make homeownership affordable at every stage of life.
Veterans are also eligible for special loan programs through the US Department of Veterans Affairs. VA guarantees part of the loan, which gives you a better deal and provides lenders with better security. Other programs for veterans include adapted housing grants and refinancing for existing VA loans, giving you money-saving options that aren’t available to civilian home buyers.
Buying a home can take plenty of time and patience, no matter where you are in your life. However, as a senior receiving the keys to your new home, you will appreciate the financial and emotional security homeownership can provide.
Photo via Pixabay