When buying a home, deciding on a price point is a critical decision and something buyers need to think about before they start looking at houses.  I have seen so many buyers randomly choose a price point because it sounds good to them, rather than investigating what they really can or cannot afford.  Just because a lender qualifies you for a certain amount, that doesn’t mean it will translate into monthly payments you personally find comfortable.  On the other hand, picking a number that “sounds good” to you, doesn’t mean that is the most you can afford or a price that makes sense based on your financial situation and the market you’re interested in.  There are so many variables that go into home pricing and the corresponding monthly payments; it is important to understand these and decide what really is realistic and comfortable for you before you get your heart set on a home you cannot afford or become bummed out by what’s available at your selected price point if you can actually afford more.

Deciding what you can afford does not have to be extremely confusing or difficult.  Here are the steps I personally follow when trying to decide how much I can afford to spend.

Make a monthly budget.  It is crucial to know what you have coming in versus what is going out each month.  Use this budget to see what you can realistically afford to pay each month.  I created an excel template for my monthly budget, and I encourage buyers to use it or a similar template for determining their budget.

Decide what you can contribute as a down payment.

Once you know what you can put down and how much you can afford to pay each month, look at an amortization table to determine approximately what you can afford.  Here is a simple table that assumes a 30 year fixed rate mortgage with a 6% interest rate:

Mortgage Amount	Monthly Payment
$75,000	$449.66
$100,000	$559.55
$125,000	$749.44
$150,000	$899.33
$200,000	$1,199.10
$250,000	$1,498.88
$300,000	$1,798.65

Ask your agent to help you estimate what your property taxes, homeowners insurance, and if applicable, monthly assessments will be based on your estimated price point.  Your agent should be able to use this information along with the budget you’ve created to determine an appropriate price point for your search.

It is important to keep in mind that your total monthly payment is going to be higher than what you see in an amortization table like what is displayed above because it will also include an amount to be escrowed for your home’s property taxes and insurance.  This is why asking an agent to give you information about these costs is important; without knowing what you should expect to pay in taxes and for insurance, it is impossible to get an accurate idea of what you can afford.  Also, in the case of a condo or townhouse, there are likely to be monthly assessments that need to be considered.  To determine the full monthly payment you will have to add these items to the amounts shown above.  As an example, if homeowners insurance costs $800 a year and the property taxes on a home are $6,000 annually, you would add $566.67 to the monthly payment ($800 + $6,000 = $6,800; $6,800/12 = $556.67).

As shown in the amortization table above, a $25,000 increase in the mortgage amount only increases the monthly payment by about $150.  That is important to keep in mind when shopping for a home, particularly if you are working in a price range in which $25,000 can greatly impact the quality of the property you are considering purchasing.  For many of us, when we look at a home that is at the lower end of our price range, we tell ourselves that because the property is less expensive we can afford to make improvements to it.  That is certainly true; however, if you plan to spend more than $150 a month making said improvements, it could be worthwhile to look at properties that are slightly more expensive to determine whether they already have the types of improvements you are looking for.  We aren’t all looking for a handyman special, and if home improvements are not your interest, it just may be a good idea to pay a little more in terms of the purchase price (which will be spread out over the next 30 years) rather than doing the work on your own.

Overall, knowing what you can afford is an important exercise when starting a home search.  Sometimes buying a home means sacrificing other things, such as regular clothes shopping sprees, in my case. But, for many of us, those sacrifices are worth it in the end.  It is so important to understand the costs involved with a home purchase and to be realistic about what you can afford and what you may be willing to cut from your expenses in order to get a home you will really be happy in.  Financing a home can seem like a daunting task, so never hesitate to ask your agent for help when you need it!

A new study published shows that properties in areas that are more “walkable” are more valuable.  Of course, this is not news to anyone who lives in a walkable area and has experienced the conveniences associated with being able to do anything from seeing your doctor to buying your groceries without getting into a car.  That’s especially true if you live in a more congested area where many stores have limited or no parking.  Who needs to deal with red light cameras, traffic, parking meters, parking permits, and inevitably, parking tickets?

When I first saw the article headline I thought to myself, “of course homes in walkable areas are more valuable, they’re in urban areas that are always more expensive.”  However, the study actually took that into account in their analysis using a process called hedonic regression.  I think this study is simply one more sign of the times.  With gas prices expected to keep increasing in the future, life without a car is looking better and better to many of us.  Cars are expensive, they pollute our environment, and they contribute to a sedentary lifestyle that is all too common in the US.

Hopefully the trend of favoring homes in walkable locations will continue and cause more cities to do things to make walking an option.  Walking is good for us, and something we should all probably do more of!

If you want to know how your home scores on the walkability scale, check out www.walkscore.com.

As someone new to formally being a member of the Realtor world, there are a lot of things I’ve been doing lately to get everything set up.  Among those things has been getting a SentriLock card made so I can get into houses that are on SentriLock.  In order to do that, the local Realtor association needs a picture of me.  So, in talking to the nice woman at the association who was helping me get all my paperwork in to get set up asked me, in a totally normal tone, to “just send in your head-shot when you’ve got a chance.”  Umm, excuse me?  When did I become a model?  In my world, head-shots are for actors and models, not average looking people in the financial industry.

Does anyone else find it totally weird the way Realtors put their own pictures all over everything?  On one hand I can appreciate that they want to make their business seem personal, but on the other, it totally creeps me out.  For one thing, isn’t seeing clients in person to show them houses, help them stage their house, sign contracts and all the other various things Realtors do enough face time to give things a personal touch?  For another, very few Realtors are models.  Most are average people which means they’re of average looks and overweight (2/3 of us are).  Why would you want to see that blown up on a billboard let alone on a life-size sign in someone’s front yard?

In my opinion, being a Realtor is about helping others to buy and sell property.  It’s about them, not me.  That’s why I refused to name my company after myself.  I find company names that are a conglomeration of peoples’ last names to be completely forgettable anyway, but regardless, I think it just feels thoughtless, and a little vain and tacky.  The real estate profession really doesn’t have a great reputation, and I think this feeling of ego that many people in the industry exude contributes to that.  Not to mention that you can’t get a Realtor in Chicago to call you back…

All I know is, I’m not that bad to look at, but it still doesn’t mean you’ll see my face on a billboard anytime soon.  If anything I want my business to focus on my clients, the homes they’re selling and buying, and making them happy in that process.  It’s not about seeing my name in big letters, and I wonder why so many Realtors choose to put their own names ahead of their clients.  They’re probably too busy admiring themselves in the mirror to worry about that though.

Our goal at The Property Shop, LLC is to simply provide great service.  We are a family operated mother-daughter team that is passionate about real estate and decided to get involved in real estate professionally after receiving very poor treatment from the professionals we encountered in the industry as clients.  On this site we will blog about the properties we list, the experiences we have, and our best tips and tricks for our clients.  We hope you will check back often!