Getting Married.... to a House
By Joel Baral \\\ Business Manager for R.C. Baral Company INC.
Everybody has to live somewhere - a house purchase done well can be a base of financial operations and a big part of retirement planning or it can be a huge financial drain. The important thing is to get in a position to know where you are now, so you have information in front of you to make an informed decision. I bought a house as soon as I understood that I could. I’ve seen that same situation happen for hundreds of clients.
So - let's get started - most people at some point buy a house….it may not be the right time yet, but it's better to know know your options, so you can make the decision at the right time. Numbers and options in black and white make the decision much easier.
Check your Credit
Loan Structure (Down Payment - Income/Assets)
Paying for the thing
Is this the time to Get Married….to a House
It always starts with your credit score and what's on your credit report. Good credit is established by obtaining credit for a long time...cell phones, credit cards, car loans, etc. and making the payments on time, with no unpaid bills or collection accounts and not having large open balances on credit cards. The longer you have accounts open, and paid on time, the better. The opposite can be true, the less credit opened, late payments or collection dings will bring down the score.
Credit Scores range from 300-850. Buying a house to qualify and get the best rate you can demands a score over 700, preferably about 720. Everybody gets three scores from the three credit bureaus and the middle one is the one that counts. They are usually all pretty close in any case. I recommend getting a copy of your credit report and looking at it in detail. By Federal Law, everyone can get a free credit report at www.annualcreditreport.com. Or your can pay for copy from one of Three Credit bureaus along with other services, (Identity Protection, etc.) Read your Credit Report in detail, your score and any problems on the report can be addressed, disputed. Scores can be improved over time, but it takes time...that's why it's a good idea to get a copy of your report and monitor it regularly.
2. Loan Structure - Down Payment - Pricing
The main options for the loan structure are amount of your down payment, and the type of loan - interest rate fixed or adjustable over time and the length of the loan, standard loan is fixed 30 year loan. Start by looking at your plan...i.e. if you are looking to stay in the home for a short amount of time, an adjustable loan may be the way to go...if you look at this as the place you want to retire in...30 year interest rate fixed is the safer bet. Also the amount of your down payment changes the structure of the loan. Anything above 20% will avoid mortgage insurance and the more down payment the easier to qualify and the lower the monthly payment will be.
For instance - you are looking at a $1,000,000 house purchase….you pay a portion of the purchase price, lets say 25% or $250,000 as your down payment. So up front you pay $250,000 plus closing costs of about $15,000 - so you are paying $265,000 up front, and you will be getting a loan for $750,000 at 4.5% for a 30 year fixed loan the payment...just for the mortgage would be $3,800.14. Interest rate goes up, payment goes up. Down payment goes up...monthly payment goes down. Qualifying for the loan is based on your income, assets you have, cash, savings, stock, retirement, credit, and future income.
3. Paying for a house includes:
Real Estate Taxes
Upkeep - Home Repair - Home Warranty Policy
Even if you pay cash for the place...there is a monthly amount just to keep the tax man happy and the house running. The mortgage goes for 30 years and the rest goes on for-ever.
The People who you will work with
Realtor will be the person showing you real estate options and when you decide on one will make your offer and negotiate the price and terms of the purchase.
Loan - Broker or bank
Your mortgage person will look at your financial records, situation and give you options for the loan and will work with you to close your loan
It's your first time, but your accountant/financial advisor can be there advising all through the process to make sure everyone is doing their job properly and you have the options to make decisions along the way.
4. Is it the right time - Maybe just date the house.
Be honest - look at the statistics for player careers, and how long players stay at any one city. Buying and selling houses can be expensive with buying/selling closing costs and real estate commission when you sell, so buying may not be the way to go. Renting may give you the stability of living in a house, without the long term expenses to go along with it. If you are in a position to buy...do the research, get many different opinions from people you trust and move forward in an informed...fashion. Getting those keys is the best feeling. Just make sure getting married is what is right for you...to the house that is.
Joel Baral is an established business manager and entertainment accountant with over 20 years experience helping clients handle their money and finances. Joel is a UCLA alumni and avid soccer fan who spends his free time with his family either playing or watching soccer. You can find more information about Joel Baral here!!