When you’ve found the perfect house, you may be surprised you have to work around a property easement. You’ll want to include learning about any easements among your steps to buying a house because the rights granted by an easement could affect your privacy and future plans for the property.
What is an easement on a property?
An easement grants someone else the limited right to use your land for a specific purpose. Common easements include access to shared driveways or sidewalks, utility company access to cables and piping, or access to a pond or hunting land adjacent to the property. In some cases, an easement can be unfavorable, such as when it allows someone to cross your property to reach theirs.
As a homebuyer, before you offer to purchase a house, you should determine if the property has an easement. If you’re working with a real estate attorney or title company, they’ll run an easement search on your behalf.
To search for property easements on your own, follow these four simple steps:
Check with the county land records office or the county clerk to determine whether the prior deed shows an easement.
Check with the utility companies to see if they have a property easement.
Order a property survey to identify any easements and where they’re located.
Ask the owner for a warranty deed. A warranty deed shows that the grantor (or current owner) guarantees, or warrants, that they have legal title to the property. It also shows property easements.
If you discover that the property has an easement, you’ll want to know if the property you’re buying is the dominant or servient property before making an offer. If you own the dominant property, you’re the easement user and can make full use of the property according to the terms of the easement, often whenever reasonably convenient.
If you own the servient property, you must allow the dominant property owner to use your property according to the easement terms. Here’s a rundown of the most common types of easements used in real estate today.
Different easements have consequences and required actions based on the terms of each easement. Here is a list of the most common easements and how they can affect you as a property owner.
Once you’ve decided to buy a house, the next step is to decide how much you can realistically afford. To help you get started and make the process easier, here are five tips to follow when deciding how much you should spend on a house.
To calculate how much you can afford to pay for a mortgage each month, start by adding up your gross annual income from all sources, including salary, wages, tips, and commissions. If you have a spouse or partner whose income will also contribute to the mortgage, make sure to include that as well. Divide the total by 12 to get your monthly income, and use that figure as the basis for your mortgage calculations.
Once you’ve determined your monthly income, it’s time to follow the 28/36 rule. According to this rule, you should not allocate more than 28% of your monthly income to housing and no more than 36% to all outstanding debts, including your mortgage. By staying within these parameters, you will have sufficient funds for groceries, fuel, holidays, and saving for your future.
Example: Let’s say you and your spouse are looking to buy a house in Anaheim and have a combined monthly income of $6,000. Applying the 28/36 rule, you wouldn’t want to spend more than $1,680 on house related expenses ($6,000 x .28) and $2,160 on total debt ($6,000 x .36).
By inputting information such as your location, annual income, down payment savings, and current monthly expenses, our home affordability calculator can provide you with an overview of what kind of house you can afford to purchase.
Adding advanced filters such as monthly homeowners’ insurance, mortgage interest rate, private mortgage insurance (when applicable), loan type, and the property tax rate can further refine your calculations. The more data you enter, the closer you will be to finding out the ideal amount of house you can afford.
The mortgage interest rate is the amount charged by a lender in exchange for loaning money to a buyer. It is expressed as a yearly percentage of the total loan amount but is calculated into the monthly mortgage payment.
The mortgage rate offered is a major factor in determining if you can afford to buy a home. It is important to note that even a small difference in the rate, such as one basis point (one-hundredth of a percentage point), could mean the difference between a home being affordable or unaffordable. Be sure to shop around and speak to numerous lenders to find the best rate.
It’s not all about your home’s purchase price. Below are the common costs associated with buying a house.
The largest initial expense is the down payment. When purchasing a home, a down payment is the cash you put towards the purchase price. Among the various loans available, you can find down payment requirements ranging from 3-20% of the home’s purchase price. If your down payment is less than 20%, you will likely need to pay private mortgage insurance (PMI). This insurance is to protect the lender in the event of you defaulting on your mortgage payments. The cost of PMI is between 0.5% and 1% of your annual mortgage, and this amount is added to your monthly payment.
Remember to include closing costs. Closing costs typically consist of lender and escrow fees, insurance, and taxes—all of which are necessary to finalize the sale of the home and make it legally yours. Expect to pay between 3-6% of the home’s total purchase price for closing costs. If you are purchasing a $500,000 home in Austin, for example, you can expect to pay somewhere in the range of $15,000–$30,000 in closing costs. These costs are due with your down payment when you close on the home.
When closing day is over, your responsibilities are not finished. Make sure to allocate enough funds in your budget to cover your monthly home expenses. Additionally, it is wise to save some money to make repairs and updates to your house in the future.
Utilities. If you have been renting in the past, you may not be familiar with the cost of utilities when owning a home. It can be difficult to estimate these expenses since some landlords cover sewer, water, and garbage in the rent. As the new homeowner, you should plan to pay for these utilities on top of your mortgage, as well as for internet, cable TV, natural gas, and electricity.
Property taxes and insurance. When purchasing a home, at closing, you will be expected to pay an initial part of the property taxes and homeowners insurance. However, you will need to keep up with them as long as you own the house. Property taxes and homeowners insurance can vary depending on the worth of your home, its locality, and any changes that may arise annually.
Home maintenance and emergency repairs. As a homeowner, it is your responsibility to take action when something breaks down or is damaged. This could be due to a malfunctioning major appliance, a plumbing leak, a broken air conditioning system, or a storm causing damage like ripped off roof shingles or uprooted trees. Additionally, it is important to set aside money for tasks that need to be done periodically, like cleaning out gutters, carpets, and pressure-washing the deck. For a comprehensive list of home maintenance tasks, consult a home maintenance checklist.
Many factors influence how much you should spend on a house, and the answer is personal. However, becoming aware of the basic costs can help you determine if this is an opportune time to buy and even save you money when purchasing your new home.
Source: By Ryan Castillo https://www.redfin.com/blog/how-much-should-i-spend-on-a-house/