Buying and Selling

3 Big Decisions You'll Make While House Hunting

What to know to make the most of your home buying budget

3 Big Decisions You'll Make While House Hunting
 

There are a range of emotions that come with the homebuying process, and excitement is definitely one of them! And while it’s great to be optimistic that the perfect house is out there, it’s just as important that you’re ready to make smart compromises. Even if you think you know exactly what you want in a home, keeping an open mind can lead to significant savings.

Here are three tradeoffs house hunters often face, and what each could mean for your budget:

1. New vs. existing

One of the main financial benefits of a newly built house is that it can be more energy-efficient than an existing one, making your utilities less expensive, says Keith Hill, a loan officer at SunTrust Mortgage.

Another appealing reason to build a brand-new home is the opportunity for personalization. You can often choose floor patterns, wall colors, fixtures, etc. But starting from the foundation can bring a lot of unknowns, which could have a significant impact on your budget. Expenses for materials may increase, for example, or you might want to make a design change during the process. “If there’s a change that’s needed, change orders can be a significant additional cost to the home,” says Andrew Barbar, president of the Florida Association of Realtors.

On the other hand, when purchasing an existing home, you’ll have a better idea of know upfront what the costs will may be. If you’re working with a tight budget, the security of this fixed expense can be key, Barbar says.

2. Fixed- vs. adjustable-rate mortgage

When determining whether a fixed- or adjustable-rate mortgage1 makes more sense for you, the most important thing to consider is that you should never borrow more than you can manage.

If you take out a fixed-rate mortgage your interest rate will stay consistent throughout the life of the loan. Knowing exactly how much you’ll be paying each year can provide security and the ability to plan your budget ahead of time. If you are confident that you will be staying in the same location for more than five years, this is a common choice.

An adjustable-rate mortgage, or ARM, has a fixed rate for a set period of time and then adjusts with the market. The initial-term payment will likely be lower than one for a fixed-rate mortgage.

“An ARM is good for a buyer who doesn’t plan on staying in their home longer than the fixed-rate period, or maybe if they think their income will increase before the interest rate adjusts,” Hill says.

The downside is that, because your interest rate will fluctuate with the market, it can be difficult to predict how much your mortgage will cost you in the future.

3. Location vs. everything else

Homebuyers are often told to prioritize location, but at what cost? Let’s say you’ve found a house in your dream neighborhood, but it’s pricey, and you could get a better deal by moving to a nearby neighborhood you’re less crazy about. Are the potential savings worth it?

That depends on your priorities.

“Look at what your priorities are, and make sure that whether you’re in the more affordable neighborhood or your dream neighborhood that it meets your criteria and it meets your standards,” Barbar says.

For example, the school district your new home is in could affect its resale value. But does that matter more to you than the size of the house? Assess your needs versus your wants, and if you truly do need four bedrooms, for instance, you may prioritize the size of the house over the school district.

Rethinking your home buying wish list doesn’t have to be a bad thing. By being flexible and looking at both sides of a decision, you’ll be better positioned to find a home you love at a price that's right for you.

Ready to get started?

SunTrust Mortgage is here to help.

1 Adjustable Rate Mortgage (ARM) products have interest rates that may increase after consummation.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

Related

Investment and Insurance Products:

Are Not FDIC or any other Government Agency Insured   Are Not Bank Guaranteed  May Lose Value 

© 2018 SunTrust Banks, Inc

equal housing logoSunTrust Bank is an Equal Housing Lender. Member FDIC

equal housing logoEqual Housing Lender. SunTrust Mortgage, Inc

SunTrust, SunTrust Mortgage, SunTrust PortfolioView, SunTrust Robinson Humphrey, SunTrust Premier Program, AMC Pinnacle, AMC Premier, Access 3, Signature Advantage Brokerage, Custom Choice Loan and SunTrust SummitView are federally registered service marks of SunTrust Banks, Inc. All other trademarks are the property of their respective owners.

Services provided by the following affiliates of SunTrust Banks, Inc.: Banking products and services are provided by SunTrust Bank, Member FDIC. Trust and investment management services are provided by SunTrust Bank, SunTrust Delaware Trust Company and SunTrust Banks Trust Company (Cayman) Limited. Securities, brokerage accounts and insurance (including annuities) are offered by SunTrust Investment Services, Inc., a SEC registered broker-dealer, member FINRA, SIPC, and a licensed insurance agency. Investment advisory services are offered by SunTrust Advisory Services, Inc., a SEC registered adviser. GFO Advisory Services, LLC is a SEC registered investment adviser that provides investment advisory services to a group of private investment funds and other non-investment advisory services to affiliates. Mortgage products and services are provided by SunTrust Mortgage, Inc.

SunTrust Mortgage, Inc. - NMLS #2915, 901 Semmes Avenue, Richmond, VA 23224, 1-800-634-7928. CA: licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, IL: Illinois Residential Mortgage Licensee #MB-989, Department of Financial and Professional Regulation, 100 W. Randolph, Suite 900, Chicago, IL 60601, 1-888-473-4858, MA: Mortgage Lender license #-ML-2915, NJ: Mortgage Banker License - New Jersey Department of Banking and Insurance, NY: Licensed Mortgage Banker—NYS Department of Financial Services, and RI: Rhode Island Licensed Lender.

"SunTrust Advisors" may be officers and/or associated persons of the following affiliates of SunTrust Banks, Inc.: SunTrust Bank, our commercial bank, which provides banking, trust and asset management services; SunTrust Investment Services, Inc., a registered broker-dealer, which is a member of FINRA and SIPC, and a licensed insurance agency, and which provides securities, annuities and life insurance products; SunTrust Advisory Services, Inc., a SEC registered investment adviser which provides Investment Advisory services.

SunTrust Private Wealth Management, International Wealth Management, Business Owner Specialty Group, Sports and Entertainment Group, and Legal and Medical Specialty Groups and GenSpring are marketing names used by SunTrust Bank, SunTrust Banks Trust Company (Cayman) Limited, SunTrust Delaware Trust Company, SunTrust Investment Services, Inc., and SunTrust Advisory Services, Inc.

SunTrust Bank and its affiliates do not accept fiduciary responsibility for all banking and investment account types offered. Please consult with your SunTrust representative to determine whether SunTrust and its affiliates have agreed to accept fiduciary responsibility for your account(s) and if you have completed the documentation necessary to establish a fiduciary relationship with SunTrust Bank or an affiliate. Additional information regarding account types and important disclosures may be found at www.suntrust.com/investmentinfo.

SunTrust Robinson Humphrey is the trade name for the corporate and investment banking services of SunTrust Banks, Inc. and its subsidiaries, including SunTrust Robinson Humphrey, Inc., member FINRA and SIPC.