Many people dream of finding the perfect lake house. But once you’ve found it, is it really that easy to buy and finance the home? It is if you follow these four steps.
Before estimating your lake house purchase costs, you need to consider how you intend to own and use the property. You have three options:
You also need to consider budget items that lenders don’t use in their qualifying calculations, but that are still very important for your own financial planning:
Suppose you wanted to purchase a lake house in Clearlake, CA for $535,000. Here’s how much it would cost as a primary residence, second home and investment property.
|Primary Residence or Second Home||Investment Property|
|Estimated monthly costs|
|Mortgage payment||$2,043 (30-year fixed mortgage at 4%)||$1,842 (30-year fixed mortgage at 4.25%)|
|Insurance (including flood)||$175||$175|
|TOTAL ESTIMATED MONTHLY COSTS||$2,753||$2,552|
|Estimated cash to close|
|Down payment||$107,000 (20%)||$160,500 (30%)|
|TOTAL ESTIMATED CASH TO CLOSE||$113,000||$166,500|
Your real estate agent will advise you on all the local nuance on transaction fees, taxes and commissions. In Clearlake, the seller pays one-time transfer tax, but other areas might require the buyer to pay it.
In destination areas, real estate agent commissions can be higher than the national average, and can also be seller- or buyer-paid, depending on the area. Only a local expert agent can advise properly. And, of course, they will structure your offer for you, and negotiate on all facets of the deal that are a priority to you.
Likewise, for destination property areas, a local lender will be comfortable with nuances like appraisals and waterfront lending. Appraisals are much more difficult in less populated areas because properties don’t sell as often. Comparable sales used for appraisal reports can be old and hard to find, especially if the appraiser isn’t from a local bank.
If you follow these steps, your closing will be smooth sailing and you’ll be enjoying your water view in no time.
Powered by WPeMatico