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11 Home Improvement Projects That Don't Add Value

Dusty Rhodes • Apr 01, 2024

Some improvements have limited appeal to home buyers, and may even affect your sale price when you go to sell.


One of the best things about owning a home is the ability to change things up, whether it’s knocking down a kitchen wall to open up space or filling your backyard with your favorite fruit trees. That freedom also offers unlimited opportunities to make mistakes, at least when it comes to spending money on home improvements that don't add the value you’d hoped for.


Of course not all home improvements are made with an eye toward adding value. Your home is your castle to enjoy as you please. If, however, you’re planning to sell soon, it might be a good idea to consider whether the improvement projects you’re considering will pencil out when you’re ready to move on. 


Don’t expect a dollar-for-dollar return


Modest home improvements that tend to make the home cleaner, safer and more functional are good bets for sellers, according to Zillow® research. However, big-ticket items, such as pools, major kitchen and bath remodels and extensive landscaping undertaken for the sole reason of adding value might not bring the return you hoped for.


According to the Remodeling 2023 Cost vs. Value Report, which estimated the return on investment on some common home improvement projects, only four improvements boosted value on resale: electric heating and air conditioning conversion, garage door replacement, manufactured stone veneer and replacing a steel entry door.*


What’s more, Zillow research into home features that help homes sell for more — or less — than expected shows that buyer preferences change over time. So a trendy home update made today for the sole purpose of adding value can seem dated — or even detract from the value — in five or 10 years. 


With that in mind, here are 11 home improvements that might not pay off when you sell your home. 


1. Turning your kitchen into a white wonderland


According to Zillow research into the paint color preferences of home buyers, a white kitchen can hurt a home’s sales price by more than $600. Instead, today’s buyers tend to prefer dark gray tones such as charcoal and graphite.


If you don’t care about the trends at the time of resale or if you plan to repaint prior to selling, you might consider how you want to feel in any given room and paint accordingly. Or you can just go wild.


2. Adding a walk-in closet


Zillow’s 2024 research into home listings shows that walk-in closets can hurt a home’s value by 0.7%, a relatively small amount but an indication that it might not be worth the cost to add a space where you can see all your clothes. If you’re tempted to turn a small bedroom into a closet, think twice before doing so. Home shoppers usually search for homes based on the number of bedrooms, and a homes’ value is derived in part from the number of bedrooms it has. Bottom line: a bedroom is going to be more valuable to most buyers than a walk-in closet.


 3. Adding a deck

A wood deck costs about $17,051, but this home improvement does not add value overall — it only adds $8,553 at the time of sale, a return of about half what you’ll spend, according to the Cost vs. Value report. The cost is even higher for composite materials, and the return even lower: just under 40%.


This is one of those features, though, that might transcend costs considerations. If you love a good deck for entertaining, it could be worth it to build it for your own enjoyment, without worrying about whether you’ll get a full return on your investment down the road. And if the deck improves the view from the property, it could make the home more attractive to buyers while allowing you to enjoy a better view in the meantime. Also, home buyers’ enthusiasm for outdoor features remains high, so anything that enriches home life outdoors could be a win.


4. Turning your garage into a bedroom

While bedrooms are certainly important, you might not want to sacrifice a garage to create one. Listings that mention garages are associated with a slight sales premium: 0.3%, according to Zillow’s 2024 analysis of listings data. Parking is often tight in urban areas, and with the high price of cars, homes that allow for safe parking could have an edge over homes without a garage that can also serve as a handy storage space. 


An exception could be if you converted the space into an Accessory Dwelling Unit, also known as an ADU, casita or mother-in-law unit. Zillow research shows that growing numbers of buyers want the ability to rent out all or some of their home. Additional Zillow research suggests that private spaces are growing in demand, and sellers are mentioning “privacy” or “private spaces” in their listings more frequently than in the past. If your home is short on private spaces, it could make sense to convert the garage. 


If you’re trying to gauge whether a garage is a must-have for most buyers in your local market, consult a local real estate agent. 


As for that extra usable space that was a must-have during the peak of the COVID pandemic, when people who could work from home did so, it’s possible the return to office work will see a slowdown in listings that mention private space.


5. Installing an in-ground swimming pool

This one is a mixed bag. Whether the pool becomes an asset or a liability depends on a number of things, including the pool’s size, age, condition, location on the property and housing market. The main drawback is the cost, and the fact that other projects would be a greater return for the same money.


An in-ground pool can set you back about $23,370, according to the home services website Thumbtack, which calculated the national average cost of installing a pool over the last four years. Add in fencing and landscaping, and you’re looking at an investment of nearly $30,000, according to Thumbtack.


If you’re a pool person, that is money well-spent. If you’re not, you’re not likely to recoup the cost of building one. A Zillow analysis of 2023 home sales found that homes with saltwater pools sell nearly three days faster and sell for about $5,238 more than comparable homes without one. 


But depending on the climate, prospective buyers might not want to spend the time and money and vigilance it takes to keep a pool clean and safe. This could translate into fewer views and offers when you go to sell. 


6. DIY — done badly

We love DIY, and there are plenty of projects you can do yourself to improve your surroundings. But there’s also a reason skilled tradespeople command high prices. Their expertise helps ensure beautiful outcomes that a new buyer isn’t going to have to spend money to redo. When you’re DIYing something for the first time – tiling a bathroom, for example, or installing a hardwood floor – there’s a learning curve that you should account for.


If you have a hankering for a feature, and want to see what you can pull off with your own labors, make sure you have the skill to tackle it. Spending big money on materials isn’t going to feel too good if the outcome is poor.


7. Creating a luxury bathroom


Bathroom remodels are some of the most expensive improvements you can undertake. Even a simple bathroom remodel can set you back more than $20,000, and won’t necessarily pay for itself when you go to sell. But the more luxury bells and whistles you add, the lower your return on investment.


For example, the cost report estimates a $24,000 mid range bathroom remodel would provide about a 67% return on investment, but an upscale one would return only about 37% of the $77,000 such a remodel could cost.


8. Wall-to-wall carpeting


Carpet has a lot of upsides, especially when it comes to warmth, and there are a ton of new styles and textures to spice up any space. But carpeting isn’t as popular as some other flooring options. For-sale listings that mentioned new carpet sold for slightly less (0.4% less) than comparable homes without it. 


Buyers, however, are willing to pay a small premium (1.2%) for luxury vinyl flooring. So if you’re thinking of floor coverings, and you like the feel of carpet on your feet, consider whether you’ll get the same enjoyment from an area rug.


9. Bamboo flooring


Bamboo is a relatively inexpensive and more sustainable form of flooring, but it, too, has fallen in popularity. Listings that mentioned bamboo floors sold for 0.8% less than comparable homes.


10. Laminate countertops


Changing up countertops can transform a kitchen or bath, but one material never seems to make it to the list of trendy or popular materials, and that’s laminate. Although there are some attractive options that mimic natural and made-made stone for a fraction of the price, homes sold in 2023 that mentioned laminate sold for 1.1% less than comparable homes.


11. High end fixtures


If you’ve got the money and derive pleasure from eye-catching fixtures, go for it. But it’s unlikely someone is going to buy your home because they’ve fallen in love with your $3,000 chrome faucet or light fixture. Consider choosing cost-efficient, attractive, well-made fixtures for updates instead.


Home maintenance has a big impact on home values


A well-maintained home can sell for about 10% more than a similar home in average condition, according to Thumbtack research.


So while improvements can add value to your home, regular maintenance will keep your home in better condition so that there are fewer improvements to tackle when you do decide to sell. Some things to keep an eye on: cleaning gutters, resealing grout in the kitchen and bath and having heating and air conditioning systems serviced regularly.




Source: Zillow


Dusty Rhodes Properties is the Best Realtor in Myrtle Beach! We do everything in our power to help you find the home of your dreams. With experience, expertise, and passion, we are the perfect partner for you in Myrtle Beach, South Carolina. We love what we do and it shows. With more than 22 years of experience in the field, we know our industry like the back of our hands. There’s no challenge too big or too small, and we dedicate our utmost energy to every project we take on. We search thousands of the active and new listings from Aynor, Carolina Forest, Conway, Garden City Beach, Longs, Loris, Murrells Inlet, Myrtle Beach, North Myrtle Beach, Pawleys Island, and Surfside Beach real estate listings to find the hottest deals just for you!

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Avoid Paying Unnecessary Fees by Lowering Your Closing Costs—Here’s How

By Dusty Rhodes • 06 May, 2024
The hardest part’s over because you’ve found the perfect house. Now you have to go through negotiations to buy the house and determine your closing costs. Closing costs are expenses in the home-buying process that typically equal 2% to 5% of your loan’s value, which can make them very pricy if you’re buying an expensive property. Borrowers might be able to reduce closing costs with the right negotiation tactics. Wondering how to lower closing costs? Here are several tips to try before you sign off on your purchase. What are closing costs? Closing costs are fees that occur when finalizing a real estate transaction on the sale or purchase of a house. Once the property is transferred into your name, these fees are due. Both homebuyers and sellers pay closing costs, but it varies who pays closing costs and how much they pay. A home loan amount, a property’s location, and a home buyer’s credit score are some of the factors determining closing costs. Some state laws also require professional services that increase a transaction’s closing costs. Many closing costs are negotiable among homebuyers, sellers, and mortgage lenders. If you’re buying a property, it’s crucial to research and shop around for home loans before choosing a lender. Can closing costs be negotiated? There is some negotiation possible, and the following includes ways to possibly lower your closing costs. Did you review your loan estimate form? Before you close on your home, your chosen lender will provide you with a contract covering all the details of the agreement. In it, you’ll find information such as your monthly payment amount and interest rate, as well as the percentage owed for closing costs. Remember that things like a low credit score can contribute to a higher interest rate, so try to have more than the minimum credit score. In reviewing these numbers, you might find that your closing costs are higher than what you’re willing to pay. Don’t hesitate to shop around at other banks and lenders, which might offer you a better deal, including lower closing costs. Did you research lender fees? Double-check the lender fees you have to pay to obtain your loan, as you can sometimes save money here, too. Your lender will charge an origination fee. You probably can’t get out of paying this, but your loan agreement could contain other negotiable fees. There’s no harm in asking your lender about these. This is an area in which it would help to have other loan possibilities for reference. If your chosen lender tacks on more fees, show them your options and negotiate a lower rate or move on to a new lender. Do you know what you are paying for? It’s vital to understand closing costs before you go into negotiations. Of course, you have your responsibilities as the buyer—you must pay the application fee, attorney fees, credit report fees, and more. But you should also know what the seller should cover on their end of the deal. For example, they should contribute to the closing costs, especially when the market is working in the buyer’s favor. To that end, the seller should also cover the real estate agent commissions. Can you add the closing costs to your mortgage? You can lower or avoid paying closing costs upfront by folding them into your mortgage. Some lenders will be open to this option, wherein they pay the closing costs for you upfront and then tack that price into your home loan. This will save you cash in the short term, but you will end up paying more for your closing costs over time since your loan repayments will come with added interest. Did you look for financial aid? First-time homebuyers might be able to get a bit of financial relief when they purchase a property. Many grants can help lower the costs of the home-buying process to encourage more people to get into the real estate market. For instance, if you choose a Fannie Mae loan to buy one of their foreclosed properties, you might be eligible for closing costs as low as 3%. There are also loan programs for those who have, for example, poor credit history, a low down payment, or veteran status. Local governments or nonprofit organizations may also provide grants for the home-buying process. These programs mostly favor first-time home buyers, and they help cover your down payment and/or closing costs. Did you research vendors? As soon as you get your loan, skip to the part where it describes the vendors who can help you through the closing process. Sometimes the people selected by your bank will charge more than ones you can find yourself. Do your due diligence to ensure you have the least expensive vendors possible. You can ask your lender for other potential vendors they might not have listed on the loan. This research could save you hundreds of dollars in closing costs. How to lower closing costs When figuring out how to lower closing costs, it’s most important to understand where you can save money. Even though each real estate deal is different, there are typical closing costs that homebuyers can expect. Application fee: Before applying for a mortgage, ask your lender if they charge an application fee. If so, make sure you understand what it covers. Application fees are sometimes negotiable, but you might need leverage in your negotiations. That’s why it’s essential to shop around and know what other lenders charge for an application fee. Appraisal: In most deals, you’ll need to pay an appraisal company to assess the property’s fair market value. Sometimes though, you won’t have to pay this fee, so be sure to discuss with your lender. Association dues: If you’re buying a property in a homeowners or condo association, you may have to pay your annual association dues at closing. The buyer and seller can split this cost, and you may owe only a prorated amount of the association’s annual dues if you buy a property partway through the year. Attorney fees: Some states require lawyers to review a real estate transaction’s closing documents. If so, both the buyer and seller have their own legal representation. Courier fee: Your lender may use a courier to deliver documents required to close a deal. Doing so can expedite finalizing the transaction, but you may pay for this courier fee as a result. Credit report fee: Your mortgage lender will run a tri-merge credit report. The reports are your credit scores and history from the three major credit bureaus. Depending on the lender, you may not get charged for this, but you’ll have to ask. Discount points: These “points” represent money you pay your lender at closing to receive a lower mortgage rate. One discount point equals 1% of your home loan amount in exchange for dropping your interest rate by 25 percent. For example, if you pay your lender $1,000 on a $100,000 mortgage loan, your 4% interest rate drops to 3.75%. It’s important to have a conversation with your lender about what your options are with these points, especially since points are not required. Using points makes sense on paper but paying more upfront may not work for everyone. For those who don’t plan to live in their home long-term or are likely to refinance, this isn’t the best option. Escrow deposit and fee: Many lenders require you to have an escrow account for your expected property taxes and homeowner’s insurance premium. Your lender makes your insurance and tax payments for you using the money you deposit into your escrow account. If you’re required to set up an escrow account, a title company, escrow company, or a lawyer will manage the process. They’ll charge a fee for doing so. Often, home buyers and sellers agree to split this cost. You can ask about these costs upfront to make sure they fit within your budget. (Pro tip: It’s always a good tip to confirm with your city or county that your taxes have actually been paid!) Flood hazard determination fee: The U.S. government requires a flood risk assessment for all real estate transactions. A third party handles the evaluation, and they’ll charge you a fee for their service. You’ll have to pay for flood insurance if they determine your property is in a flood zone. Be sure to keep this possible expense in mind when choosing a property. Homeowner’s insurance: Homeowner’s insurance is usually not required by law, yet most lenders require it. It is a good idea to have it in case of damage to the property, and you’ll usually pay your first year’s insurance premium at closing. Mortgage broker fee: You can hire a mortgage broker to help you find mortgage loans. If you do, they’ll charge you a commission based on the percentage of your loan amount. This is usually between 0.5% and 2.75% of the property’s purchase price. To save money, you could look for loans yourself. Origination fee: Most lenders charge a loan origination fee when processing your home loan application, which is usually 1% of your loan amount. Not all lenders charge an origination fee, however, so, again, it’s essential to research different mortgage lenders. Upfront: You pay the entire cost of your PMI at closing. Split: You pay part of your PMI costs upfront, and your lender folds the balance into your monthly mortgage payment. Monthly: You pay nothing on your PMI at closing, and your lender adds your entire PMI balance to your monthly mortgage payment. Lender-paid: Your mortgage lender covers your PMI costs in exchange for raising your interest rate; this method can save you money at closing but cost you more over time. Recording fees: Local governments require a copy of your title before it will recognize you as the property’s legal owner. Your title company usually handles this transaction, and they’ll charge you a fee for that service. However, that’s not always the case, so be sure to ask. Title search fee: Before you can purchase a property, someone must verify its ownership. A title company handles this process, ensuring no one else can claim the property after you purchase it. The company charges a fee for this service, and it often comes hand-in-hand with title insurance, which protects the buyer from future claims against the property. This fee varies by location and property; it ranges from $200 to $1,000. You can save money by searching for a title company within your budget. Overall, to save money, you should compare lenders and their fees to make sure you’re getting the best possible deal. You’ll see these fees on a document called a closing disclosure. These are the different costs to consider when buying a home. Source: BiggerPockets Blog

What Hurts Property Value? 7 Things to Address Now

By Dusty Rhodes • 25 Mar, 2024
Property values fluctuate as a result of many factors, and as a homeowner, it’s important to be aware of factors that can drive home value down. Some of these factors are out of your control, such as market conditions, interest rates, and the economy, while others are very much in your control. From unappealing renovations to neglecting maintenance on your home, some projects, or lack thereof, can negatively impact your property value. It’s best to be aware of what hurts property value so you can protect your home and get the most ROI when it comes time to sell. 1) DIY projects gone wrong Many homeowners take on home improvement projects to not only make their space more livable and enjoyable but to also add value to their greatest investment. Whether it be a bathroom addition, adding a deck, or purchasing a fixer-upper with the promise of profit for flipping it – most people start a project with the idea that it will increase the value of the home. As exciting as the projects may be, they can sometimes turn out not as expected and hurt your property value. Are you wanting to build a deck, extend the kitchen, or remodel the bathroom? Even if you’re an expert at smaller DIY projects, it’s better to leave the bigger remodels and renovations to a professional. If not executed properly, they can hurt your property value. 2) Lack of curb appeal First impressions make a difference when selling a home. So, your curb appeal should entice prospective buyers and help your home sell faster. If you’ve noticed the exterior paint is chipping off or your trees and shrubs have seen better days, chances are potential buyers will notice too. Luckily, you can achieve great curb appeal with some minor adjustments. Update the exterior paint. The color of your home is oftentimes one of the first things a buyer will notice. Faded, chipped, and flaking paint can dramatically decrease your curb appeal and hurt your property value. Update the exterior lighting. If the pathway leading to your front door is dimly lit or your fixtures are outdated, now is the time to update the exterior lighting. Exterior lighting helps your home feel more inviting and complements your landscaping. From post lights, LED lights, solar lights, and wall mounts, the options are endless. Switch out your old fence. Worn fences are an eye-sore and can take the attention away from your home and hurt your property value. Replacing your fence for a new one can give your yard the boost it needs by enhancing the greenery, and showing prospective buyers that you care. Fencing comes in a variety of different options such as wood, vinyl, aluminum, wrought iron, and composite. Consult with professionals to determine what material is best for you. Landscaping. When selling your home, it’s best to go with an easy-to-care-for and clean landscape design to appeal to buyers, and increase the property value of your house. Simply edging the beds, mulching the garden, and pruning the trees and hedges can transform any landscape. Wash the windows and the siding. It doesn’t take long for your house and windows to form a layer of dust, dirt, fingerprints, or even algae. This can leave your house looking dingy and gray and hurting your property value. Replace your front door. It’s no surprise that front doors quickly begin to look worn and tired with daily use and harsh weather. Replacing your front door is a quick and cost-effective way to add curb appeal or add a pop of color to your home. 3) Unsightly interior wall paint Just like exterior house paint, streaky, chipped, or low-quality paint could discourage potential homebuyers and hurt your property value. A fresh coat of neutral paint on the cabinets, walls, and trim can make all the difference. Busy and bright wallpaper, tiles, or flooring can also divert the attention of the buyers away from your home. The best rule of thumb is to always choose neutral options for permanent items. Then incorporate color with your décor and furnishings. 4) Lack of upkeep It’s important and necessary to keep your home in great condition and regularly perform general home maintenance chores. Letting your home fall into disarray and neglecting it will hurt your property value and could have consequences on your list price. Buyers will want to negotiate repairs to avoid any major expenses following the sale. This is why most buyers require an inspection contingency in their contract. If something breaks, be sure to fix it. And if you don’t know how to fix it, hire someone who does. This will prevent any issues from getting out of hand. It’s often more expensive to remedy any problems the longer you wait. Keep an eye out for any problems with your roof, foundation, HVAC system, gutters, and if a rodent or pest infestation emerges. If you develop any of these issues it’s important to hire a professional immediately. 5) Carpet everywhere Your carpet will be in great condition during the first few years of owning your home, but will quickly begin to show signs of use, start retaining odors, and can be difficult to keep clean. Not only will buyers be wary of wall to wall carpeting because it can be expensive to replace, but it can also collect indoor allergens . If possible, it’s best to stray away from carpet and opt for hardwood, laminate, or tile flooring. 6) Excessive clutter Every home manages to accumulate belongings throughout the years, and you usually don’t realize just how much clutter you’ve collected until you’re about to list your home. Just as dirt and grime build-up, so can clutter. If your room is overcrowded with stuff, it’s a good idea to clear some of your belongings out. Donate items you no longer need or want, and find hidden, permanent homes for the items you use just once in a while. Decluttering is an inexpensive way to add value. 7) Unpleasant smells Not only do offensive smells leave a bad and lasting impression, but they can also hurt your property value. Whether the lingering odor is cigarette smoke, pet odor, or mold, it’s best to identify the root of the smell and eliminate it. Avoid masking the smell with a strong perfume or fragrance. To avoid unpleasant smells altogether, it’s best to keep your home clean. Routine cleaning includes vacuuming and dusting regularly, wiping down countertops and surfaces, and cleaning the bathroom and kitchen. Source: Redfin Blog

Can I Buy a House With Student Loan Debt?

By Dusty Rhodes • 11 Mar, 2024
Loan officers break down what you need to know about student debt and owning a home. Student loans are undoubtedly a daunting financial obstacle, so it’s only natural to feel like they’re holding you back from owning a home. But buying a house with student loan debt is possible. Whether or not you should get a mortgage with student loans will depend on the amount of debt you have and what your personal financial situation looks like, including factors like your income, savings and credit score. Steven Park and Kathy Argento , mortgage loan officers with Zillow Home Loans, both say owning a home while paying off student loan debt is far more common than many might think. “If you have a stable source of income and can manage your finances, student loan debt shouldn’t stop you from home ownership,” Park says. Minimum payments for student loans can be very manageable alongside a mortgage payment, Park adds, depending on how much you owe. And while being debt averse and wanting to pay everything off might seem like the responsible thing to do, it may ultimately lead to missed opportunities. We asked Park and Argento some of the biggest questions about buying a home while paying off student debt. Can you get a mortgage with student loans? It’s not uncommon for a first-time home buyer to have anywhere from $30,000 to $100,000 in student loan debt and still qualify for a mortgage, Park says. “We approve people with student loan debt all the time,” Argento adds. Like any other kind of debt, the student loans will simply be part of an applicant’s total debt obligations and credit profile for qualifying purposes. The same considerations apply to car payments, credit card payments and any other personal loans. “It just simply must be counted into their debts,” Argento says, “whether or not they are currently deferred.” Argento emphasizes, carrying student loan debt should not prevent you from considering buying a home. Instead, talk to your loan officer about how your student loan payments may factor into your application. Factors that impact buying a house with student loans Here are some important factors your loan officer may review with you. Your debt-to-income (DTI) ratio A debt-to-income ratio is the percentage that compares your monthly debt payments to your monthly gross income, giving you a realistic perspective on what you can and can’t afford. A DTI ratio of 36% or less is generally considered ideal because it will show your lender that you’re not overstretched financially. That said, many lenders will lend with DTI ratios higher than 36%, depending on the borrower’s credit profile, desired loan amount, and other factors. You can use Zillow’s DTI calculator to get a realistic estimate of your personal debt-to-income ratio. Argento says outstanding student loans have the potential to reduce your purchasing power, depending on the broader financial situation you’re facing. “You should consider paying off your student loans if your debt-to-income ratios are so high, they prevent you from buying a home at your desired price point,” she says. But they also might not be hurting your purchasing power at all. It depends on your income, the actual purchase price of the home, any other debts you might have on your credit report and the cost of your new monthly house payment. Your credit score Loan officers will consider your credit score when you apply for a mortgage. Paying student loans on time can affect your credit score, which is why it’s important to make timely payments to keep your score strong . Your savings When money that you would normally put into savings is going to your monthly debt payments, it can be harder to save for other things — like a down payment or closing costs on a home. Some mortgages do require as little as 3% for a down payment — or even 0% down with a VA loan — but the more you have saved, the more flexibility you’ll have when it comes to purchasing power. While it may not seem that way, saving for a down payment can still be an option while you’re paying off student loans. Budget and allocate money to buckets that make sense for your lifestyle, so that you can pay down your student loan debt and also reach your home buying goal. Here are 21 creative ways to save . How to buy a house with student loan debt Before diving into the process, do yourself a favor and get pre-qualified so you can see exactly how your student debt might affect which loans you do and don’t qualify for. Once you’ve done this, there are other steps you can take to move the process along. Check your credit score and work on improving it if needed Your credit score is an important part of whether or not you’ll be eligible to buy a home. If you went through a period of time where you weren’t able to pay off your loans and they’re damaging your credit score, look for additional ways to improve your score. For example, focus on paying your credit card bills on time. If you want more information on how your credit score affects qualifying for a mortgage, check out these Zillow resources that outline how your credit score is calculated and exactly what kind of credit score you’ll need if you’re considering buying a house. Aim to decrease the number of debts you owe Say goodbye to as much debt as you can. This will help improve your DTI, which ultimately affects which homes you will and won’t be able to afford. Pay off any manageable outstanding debts — like small credit card bills, medical bills or outstanding car payments. Tackling other debt before you take on a mortgage will help set you up for homeownership success. Learn about more ways to pay off debt . Gut check your financial situation and assess if you can afford to buy a home Zoom out and take a look at your current budget and projected monthly and annual income before you decide to add a mortgage and other homeownership costs to your spreadsheet. If you don’t know where to begin, Zillow’s affordability calculator can be a good starting point. Looking at your bank accounts, your current pay and your projected pay is a helpful way to indicate whether or not owning a home will feel manageable to you. Consider first-time home buyer or DPA programs There are first-time home buyer programs, including down payment assistance (DPA) programs, that may help make financing a home more attainable, especially if you’re managing paying off student loans. Zillow’s guide to first-time home buyer programs will help give you more information on resources you should look into as you explore your options. Can I buy a house with more than $100K in student loan debt? Whether or not you can buy a house with more than $100K in student loan debt will depend on your total financial picture. Debt is all relative to the stability and size of your income, Park says. “Luckily, the mortgage industry will prevent someone from overburdening themselves with payments that are too high relative to their income,” he adds. To decide whether you qualify for a mortgage, lenders will determine your student loan payment based on your credit report and then factor that into your DTI. Your DTI will help determine the maximum loan amount you would qualify for. Once you take a look at what you can afford based on your current income and monthly student loan payments, you can decide if there’s an alternative path that might help you achieve your home buying goal. Mortgage loan officers won’t be able to give you financial advice, so you should consider speaking to a financial advisor for some clarity on your options. For example, financial experts might point to income-driven repayment plans to help you optimize your income and monthly student loan debt — and ultimately, your DTI — in a way that may benefit you when you apply for a mortgage. You might actually be paying more towards your student loan than you need to be, based on how much money you’re making and how much you owe, and an income-driven repayment plan can help resolve that, ultimately making your payments more manageable and an ideal mortgage within reach. Should you pay off student loans before buying a house? When considering whether to buy a house or pay off student loans, it’s important to look at where you live and where you stand financially. “Home ownership is not for everyone at every stage of their lives,” Park says. If you’re able to afford it, buying a home in today’s rising market is still a favorable investment as homes continue to increase in value, Argento says. “Why pay rent at 100% interest when you can buy a home which will increase in value over time?” she explains. “I have never heard of anyone saying they wish they did not buy a home when they did. Homes continually increase in value over time and will always be a solid investment.” You have to ask yourself: Do I have what it takes to pay the down payment? Can I afford the monthly payment? Will I be able to continue to make the same payment for the next 10 years? “If you can answer yes to all of these questions, you will most likely benefit from owning a home, and you should start looking for a house,” Park says. Source: Zillow Porchlight Blog
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