How To Choose The Right Size of Home For You

If you are in the market for a new home, size and location are of the utmost importance.  An abundance of space is tempting yet it will hike your property tax bill.  A large home also requires that much more maintenance to boot.  Too little space will make you feel cramped and make it difficult to start a family or even welcome a pet.  Here’s a quick look at how to choose a home with just the right amount of space.

 

Mind the Size of Square Footage

Home size is measured in square feet.  If you are a single home buyer without a family or partner, space is not that important.  However, there is always the potential that you will add a significant other and/or a pet to the home in due time.  The average home stretches across 2,687 square feet.  An individual home buyer will be comfortable with less than this amount of space.  However, if you err on the side of going too small with your new home, it might prove difficult to sell the house when the time comes to upgrade to something larger.  The average couple can enjoy a high-quality of life in a home with as little as 1,250 square feet.  The key is to find the right balance between space, resale value and property taxes.

A family consisting of three or more people will likely require a 3-bedroom home.  The typical 3-bedroom home has around 1,300 square feet to 1,600 square feet of space.  If you plan on adding to your family, look for a home with more than 2,000 square feet of space to ensure your growing family has enough room to play and enjoy at least a modicum of privacy.  Those who are planning on adding spacious niceties such as a home gym or home theater will require 3,000 square feet or more.

 

The Pros and Cons of Spacious Homes

It is awfully tempting to choose a home that is larger than what is currently necessary in terms of space and luxuries.  Do not give into this temptation until you have considered the downsides to a large home.  For one, the hike in square feet will bump up your property taxes that much more.  Additional space will also cost more to cool and heat.  Though it is certainly nice to use the extra rooms in a large home for storage, it is comparably cheaper to opt for a smaller home and pay for storage at a nearby facility.

If you were to poll those who moved into homes larger than necessary, most would testify they love their abundance of space.  However, these same homeowners enjoying their spacious digs are also quick to complain the extra room minimizes social interaction amongst family members.  A home of just the right size forces family members to cross paths and communicate at a fairly high frequency.

 

How to Choose the Perfect Size: Count the Bedrooms

Those in the housing industry swear by the mantra of “location, location, location.”  However, location is only one piece to the real estate puzzle.  Home size is just as important as its position on the map.  In general, there should be enough dining room and living room space to accommodate two times as many people as there are bedrooms in the home.  The bedroom count really is the main determinant of total square footage.  If possible, allot some space for family members and guests to interact away from the living room and kitchen to make the house feel like a true home.  A home with such “away” spaces for people to congregate in small groups makes the property that much more enjoyable for everyone.

What is the Difference Between an Interest Rate and APR When Buying a Home?

The many costs associated with buying a mortgage often leave new buyer’s heads spinning. Between closing costs, interest rates, and additional fees, how do you stay on top of everything? The more you understand the different terminology of mortgages, the better equipped you’ll be to make smart choices about your money when buying a house. 

One of the most confusing aspects of choosing a mortgage is understanding your interest rate and annual percentage rate (APR). This guide will break down the differences between each so you’ll be ready to find the best mortgage deal

 

Interest Rates and APR Defined

When you choose to buy a home, you’ll likely get financing from a mortgage lender or bank. The lender generally will pay for a percentage of the loan, and you agree to pay this amount back with interest over a specific period of time. Your interest rate is the amount of interest you’re accruing on your home mortgage each year. 

That means when you pay your mortgage every month, you’re paying a portion of the principal, or the amount you originally borrowed, as well as the interest you’ve accrued for that month. With that in mind, the longer the length of your loan, the lower your monthly payments and the more you’ll pay in interest. 

Your interest rate is not the same as your APR, or annual percentage rate. While we’ve just defined your interest rate as the amount you’ll pay to borrow your mortgage loan, this doesn’t include any other fees or charges that come along with having a mortgage.  

Your APR is both the cost of your loan as well as additional fees. Your APR will include the cost of mortgage insurance, loan originator fees, discount points, and more. That means you don’t want to only look at your interest rate when shopping around for a mortgage. Your APR will give a much clearer picture of how much you’ll owe on a monthly basis. 

 

How to Compare Mortgage Rates

Now that you understand how interest rates and APR differ, you’re in a better place to compare mortgages to find the best fit for your budget. The best place to find all of this information is on your loan estimate. Your loan estimates from all of your lenders will look the same since it’s a regulated government document. 

You’ll find your loan interest rate under your section for loan terms, and you’ll need to read on further to find your APR under the comparison heading on the third page of your loan estimate document. When deciding two similar loans, it’s a good idea to jump to the APR. This will help you land the best deal. 

In general, APR provides a clearer picture of which lender is charging you more. However, always do your best to research any additional expenses that might not be included in your APR such as property surveys or title insurance. It’s also important to note that APRs on adjustable-rate loans won’t show the maximum interest rate possible, so this could be misleading.  

If you want a lower monthly payment, pay the most attention to the interest rate. If you’re more concerned about the overall cost of your loan, focus more on your APR. Of course, this is not a one-size-fits-all solution. Take all aspects of the mortgage application process seriously to make sure you know what you’re getting yourself into. Your mortgage is likely the biggest financial agreement you’ll ever enter. Don’t take it lightly! 

Can You Buy A House with a VA Loan?

Very different from a regular home loan, Veteran Affairs mortgages (commonly known as VA loans) have allowed over 22 million service members to buy a home since 1944. This advantageous program allows qualified veterans, active duty members and their spouses to purchase a property with no down payment, low interest rates, no mortgage insurance and usually allows for a higher debt-to-income ratio than conventional mortgages. So, what’s the catch?

 

If you are considering buying a house with a VA loan, you must make sure that the property you have in mind can be financed through this type of mortgage. 

 

1. The house must be used as your primary residence

VA loans can only be used for houses that the borrower will live in within 60 days and will use it as his or her primary residence. 

An exception is made for active duty members on a case-by-case basis: if the military member cannot move in within 60 days, in the case of deployment, for example, his or her spouse or minor child can satisfy the occupancy requirement in certain cases. 

Another exception can be made if the borrower will be retiring within 12 months: he or she might be able to negotiate a later move-in date. 

 

2. The house must be in move-in condition

Properties purchased with VA loans must be “safe, sanitary, structurally sound and appropriately valued.” These Minimum Property Requirements (also known as MPRs) include mechanical systems in good working condition, dry basements and crawl spaces, no reported presence of termites or fungus, and so on. 

If you have your eye on a property that might not meet these requirements, it will have to be remediated before the loan closes at your expenses or that of the seller. Although foreclosures are not excluded from VA loans, the fact that these properties are often sold as-is often disqualifies them. 

 

3. The house must not be an income property

Properties that are eligible for VA loans can be single-family homes, townhouses, condominium units in projects that have been approved for VA loans. Manufactured homes are theoretically authorized but can prove difficult to get approved by the lender. If you are planning to live in one of the units, multi-family homes with four units or less are also eligible. 

However, any building whose highest and best use would not be residential cannot be purchased with a VA loan. This includes apartment buildings with more than four units as well as properties that could be used for business purposes, such as working farms or a property with a store attached. Outbuildings, like a horse barn on the property, or a large acreage, can also create some difficulties to get a property approved. 

You can not buy a secondary or seasonal home with a VA loan and, although building a home with a VA home is allowed, buying raw land even to build in the future is not.  

There is no cap to VA loans. However, if you are planning on buying a house with a VA loan above a certain limit, which is based on different levels depending on the location of the house you are interested in purchasing, you might need to put down a down payment, usually equivalent  to 25 percent of the difference between the VA loan limit and the purchase price of the home.