Ready to Swap Your Starter Home for a Dream Home?
You moved into your current home some years ago, and though it served your needs then, you realize it’s not destined to be your ‘forever’ dream home. You might be longing for a gorgeous, spacious kitchen with a large island, an open-concept main floor, one or more additional bedrooms, a spa-like ‘en suite’, a bonus space/play area for the kids – the list could be a long one.
Thinking about swapping a starter home for a dream home is fun to ponder, but making sure that transition would be realistic would be the first consideration. Is a dream home in your future?
You’ll know you are ready to pursue your dream home when…
You Have Fluid $$
One huge advantage of home-ownership is the opportunity to allow your home to build equity. You can calculate the current equity on your home by utilizing a simple formula:
* the current market value – the total sum of all debts against home = your home’s equity *
Equity is truly an automatic savings plan that can pay big dividends! According to CoreLogic, homeowners gained an average of $15,000 in home equity during 2017. This was due, in large part, to a sharp rise in home values. If we move on to 2018 and 2019, homeowners gained an average of $6,400 during the first quarter of both years, taking all 50 states into account!
If your home’s equity has served you well, you have the option to use that money as a down-payment on your dream home! If your equity amount allows you to put down 20%, your monthly payments will be smaller and your lender will, likely, provide a lower interest rate making your dream home that much more affordable.
You’ll, also, want upfront money available for closing costs which could include loan-origination fees, appraisal fees, title searches, title insurance, taxes, etc.
You Have a Sound Monthly Budget
If the mortgage payments for your dream home will exceed those of your starter home, you’ll want to make sure your budget will, comfortably, accommodate that increase. Be sure you understand all the components that would contribute to the new mortgage payment which could/would include property taxes, possible HOA fees, homeowner’s insurance premiums, interest, and any PMI or private mortgage insurance. Consider your total housing payment, not just the mortgage.
After the full monthly mortgage payment is determined, be sure you allow yourself some breathing room, financially. Don’t become ‘house poor’ where you can make the mortgage payments but have little left over for discretionary spending that would be used for regular entertainment, a yearly vacation, a newer vehicle every few years, new furniture when needed, etc. To play it safe, economic guru, Dave Ramsey, suggests your entire mortgage payment should not be more than 25% of your take-home pay to avoid becoming ‘house poor’.
You Have a Strong Credit History
Hopefully, you have paid your mortgage payments for your starter home, consistently, on time – and for lenders, that is huge! If your mortgage-payment history has been stellar and you have used all your available credit wisely, your journey towards acquiring your dream home becomes much more solidified. With strong credit under your belt, lenders will embrace you as a ‘low-risk’ borrower. Lenders will view your good credit as a reflection of your good decision making, and that places you in the low-risk, we-trust-you category. Your good credit would encourage lenders to more readily offer a lower interest rate which, again, would lower the monthly mortgage payments for your dream home.
You Have a Family Who Says, "Let's DO This!"
Moving can be a very emotional experience for many people. Homes have a way of creating and collecting memories over the years, and leaving a home filled with them can be difficult. Home-ownership is more than just owning a structure – it’s about becoming emotionally connected to a very personal space where newborns were brought home from the hospital – where birthdays and anniversaries were joyfully celebrated – where friends gathered for backyard BBQs – where Christmases became magical. Owning a home is like being in a long-term relationship. Leaving the memories can boil down to family members not wanting to leave a place that has been the center of one’s universe – the constant in one’s life. For these reasons, some people never move.
If, however, you and your family are ready to embrace a new space with excitement and eager anticipation, you know the time is right. A home that is newer, larger, and closer to restaurants and entertainment options can be very beckoning. That could include seeking a home located in a master-planned community with hike and bike trails, golf courses, waterways, spa and fitness centers, and more. These types of amenities can offer enhanced lifestyle opportunities!
When you have the financial resources, the credit, and the desire to swap your starter home for a dream home, the only thing left to say is, Go for it!