How to brace your budget for the Charlotte real estate market
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Charlotte's spring buyers are faced with limited inventory and still-high home prices.
Why it matters: While lack of affordability has pushed many buyers to the sidelines, they can regain purchasing power with the right financial plan.
What they're saying: Wannabe buyers fall into two camps, Domain Chief Financial Planner Katy Song tells Axios. There are people who are over-prepared or people who think they can afford more than they realistically can, she says.
Here are her tactical tips for making sure you're ready to buy, and determining what you can really afford.
💳 Look at your credit. If you don't have credit or it's not in good shape, it's not time to buy, she says. Your credit score determines how willing lenders are to give you money.
- If you're starting from scratch, Song recommends getting a secured credit card. To start building your score, put a recurring payment like Netflix on the card, and automatically pay it off every month.
- If you have credit card debt, devise an aggressive plan to pay it off.
- You don't need to pay off your student loan debt or even car loans before applying for a mortgage.
💸 Calculate your maximum monthly payment. Generally, 28% to 32% of your net monthly cash flow is safe.
- Reality check: Your mortgage lender will likely approve you for a higher mortgage than what you could comfortably afford, Song says. They're not factoring in recurring expenses like therapy, gym memberships or that oh-so-necessary pet subscription box.
💪 Build your savings and downpayment. Put away at least three months of expenses for emergency savings.
- For a downpayment, Song recommends putting down at least 10-20% to keep your monthly payment comfortable and start building equity as quickly as possible.
- Plus, more money down could get you that extra bedroom, for instance, even if it means having to save for longer. Where real estate is relatively affordable compared to incomes, people in their late 20s and early 30s are hunting for their first home. But for those in high-cost areas, like New York, Chicago and San Francisco, it's not even on their radar, Gatti says.
- For many people, the desire to own is emotional, whether it's the fear of having to move or wanting a permanent place to grow your family and build memories.
Reality check: It's OK not to buy. "It's not a reflection of you or your competence or progress as a person or legitimacy as an adult," finance writer Katie Gatti, of Money with Katie, tells Axios.
What's next: President Biden wants to give U.S. homeowners a $10,000 tax credit to sell their starter home, Axios' Emily Peck reports.
- His plan also includes a tax credit for first-time buyers that amounts to $5,000 a year for two years.
Go deeper: 6 tips for first-time homebuyers in Charlotte from a first-time homebuyer