History has shown that, over time, buying real estate can be an excellent investment. Good properties in good locations tend to appreciate over several years and can be an excellent way to diversify your overall portfolio. In Napa, for example, real estate values have risen a whopping 73.54% over the past ten years as home values appreciated at an average rate of 5.67%. Napa ranks in the Top 10 markets for real estate value appreciation in the United States.
So, while owning Napa Valley real estate can be highly desirable, potential buyers must make sure they have sufficient net worth and the financing to buy. If not, how will you save enough to make it happen?
Saving to Buy
If you already have enough money to pay cash for the property, then you probably don’t need to worry about saving for the down payment. However, in the current economy, 30-year conventional mortgage rates are nearing 3%, a historically low level. Most financial advisors would suggest you retain your liquid capital, pay a 20% down payment to avoid PMI (Private Mortgage Insurance), and apply for the low rate.
If you do not know if you have sufficient assets to buy a property for sale Napa Valley, here are factors to consider.
Understanding the Debt to Income Ratio (DTI)
Lenders hesitate to lend to borrowers who may be overburdened with debt and might not be able to cover a monthly mortgage payment. Your potential mortgage payment will be determined by how much you can reduce the borrowed principal with a down payment. Naturally, the more you can save as a down payment, the less you will need to borrow.
Generally, when you apply for a mortgage, lenders calculate your current obligations plus the projected monthly mortgage obligation consisting of the principal, interest, insurance, and taxes. Add that mortgage payment to your other monthly obligations (credit card debt, insurance premiums, and more), then divide the total by your total monthly income, they arrive at a hypothetical debt-to-income ((DTI) ratio.
If you DTI equals more than 40% or so, you should do one of two things or both:
- Save more for your down payment to reduce your borrowed principal
- Reduce current debt levels
Saving for a Larger Down Payment While Reducing Debt
To begin your quest, perform a Net Worth analysis of your financial life. Use software like Quicken or another method to list and track all current assets and liabilities. By doing this, you develop a better understanding of where you stand and how you should proceed to improve your financial picture.
- Set a specific and achievable goal to reduce debt and accumulate your target down payment
- Designate a down payment savings account where all non-essential funds can go
- Reduce spending by driving a less expensive car
- Eliminate expensive vacations for now
- Cut unnecessary entertainment and clothing costs
- Stop using credit cards for non-essentials
- Focus on paying down the highest interest debt first
As time passes, recalculate your debt-to-income ratio. When you reach your goal, you can confidently return to the lender to discuss the mortgage on your property for sale Napa Valley.
Work with Proven Napa Real Estate Agent
Owning real estate in Napa Valley is a dream of many. Once you earn preapproval from your lender, select a proven Napa real estate agent with long experience living and working in the region.
Adam Ghisletta, a successful Napa Real Estate Agent, has lived and worked in Napa Valley throughout his life. As a member of a longstanding Napa Valley agricultural family, Adam understands the current value of any property in the region. He can help you negotiate the best price, and advise you about every aspect of buying and closing on your future Napa Valley legacy.
To consult with a customer-focused, proven professional, contact Adam Ghisletta at +1-(707)-363-5868.
Or, if you visit Adam’s website, you can leave your brief contact information, and he will contact you immediately.