How much home can you afford?

There are almost 12,000 homes for sale in San Antonio, TX and I've been answering the question "So how's the market" with the response "It's actually very good... Why do you ask?"

In the last few months I've met a lot of first-time home buyers and a lot of them are timid and concerned about the process. Well, when I read the April 25th edition of the San Antonio Express-News article How much house can you afford? I knew I needed to respond.

First off it was a very good article and believe that first-time home buyers should read it on-line if they get the chance. The first thing a buyer should do is to get pre-approved with a Mortgage Banker. Now one of the things that everyone should remember is that the lower the interest rate the higher the price of the home you can purchase. However; the caveat with this obvious rule is that no one should ever spend more money than what makes sense with their budget.

The other thing to remember about interest rates is that right now while they are very low, they are also extremely volatile and can go up very quickly. The chances of them going lower is slim based on everything I've read lately and what I've been told from reputable mortgage bankers like WR Starkey. The relationship between the cost of a home decreasing by $5,000 and the interest rate increasing by 0.5% means that you would increase your monthly payment by about $3-5 per $100,000. If you want to prove this for yourself, look at the principle and interest on a $100,000 home at 5.5% and compare it to a price decrease of $5,000 ($95,000) and an increase of 0.5% (6.0%). Once proven, you should immediately call your Realtor and schedule a meeting to view homes that day.

The last thing I'd like to comment on is what to consider when purchasing your first home and that is resale. The Express-News indicated that first-time home buyers typically stay in their homes 4 years so yes, resale is very important when purchasing for the first time. Buying a home at the right price, that will retain and hopefully increase in value is extremely important. So choosing one that is very old, unique, a fixer-upper, and appeals to your unique tastes may not meet the "resale" factor. So what is it that I recommend? Vanilla homes. You know, the typical 3 bedroom, 2 bath, 2 car garage with a good floor plan in an area that is notorious for consistent sales year after year. So how do you find these homes... meet with a San Antonio Realtor.

Thanks for reading.