Today we’re starting a new segment here on the Greater Hartford Real Estate Blog, Q&A. Our first conversation is with our very own Kyle Bergquist, who is a financial advisor with Conifer Investments.
Greater Hartford Real Estate Blog (GHREB): With prices either stable or falling, there seems to be a fair number of young professionals looking to buy their first home. How would you recommend folks prepare for their purchase?
Kyle Bergquist: The single most important step is making sure you can actually afford the houses you look at, and will end up buying. I recommend going through a budgeting excercise to help you decide how much you are comfortable paying on a monthly basis for your mortgage and other home-related expenses. The monthly mortgage figure, combined with the mortgage type and rate, sets the price range as you begin your home search. Many people rely on their mortgage broker to tell them the maximum they are qualified for and then use that value in their search. I’m not sure how that would work out with today’s mortgage market, but until recently it would have resulted in you buying a house you couldn’t actually afford.
GHREB: What sorts of items do people need to consider in their budget?
Kyle: Start with your income and then begin subtracting out expenses. It’s easy to forget items, like auto insurance, that are paid infrequently. We use our fireplace in the winter so two expenses we have are firewood and annual chimney cleanings. They are once-a-year bills, and I’ve forgetten them before. Take a quick look through your checkbook and credit card statements to make sure all your current expenses are considered. Also think about expenses that only homeowners pay, for example water bills and garbage collection fees. Your agent should be able to rattle off the list of typical expenses for the towns in which you are looking. There are also some online budget worksheets (CNN Money, About.com) that can be used to structure your effort.
GHREB: We’ve talked about making sure the people can afford the homes they buy.  What about the initial purchase?
Kyle: During the purchase process, buyers need to have money available for not only the down payment at closing, but also a number of other expenses as well. Some, like the first and second deposits that accompany an offer to the seller are actually early contributions to the down payment They go towards the purchase price and become equity in the property. Others, like the expenses associated with home inspection, mortgage commitment and appraisal are costs of buying real estate and will never be recovered. Finally, buyers typically have to prepay some of their expenses at the closing table. Property taxes and homeowner’s insurance are usually held in escrow at the request of the mortgage company. Costs paid by the seller that will benefit the buyer are equitably divided, so for example, the buyer ends up paying for all the heating oil in the tank.
You’ll want to talk with your agent to get a sense of the initial deposits that accompany offers in your area and typical home inspection costs.  Your mortgage broker is the best person to ask about everything else.  They can walk you through the other expenses that you’ll probably see at closing, like a preview of the Good Faith Estimate that they will provide after your offer is accepted. Some people also like to set aside some money for repairs and other work they want have done immdiately after the closing, so keep that in mind also.
GHREB: Anything else that you would recommend?
Kyle: I guess the only other point I want to make is that when you move into a home, there are going to be expenses that you might not expect. A lawnmower. A bed and nightstand for the guest bedroom. And lots of stuff to hang on the walls. Leave a little extra room in the budget for the incidentals and don’t be afraid to get creative until you can afford what you really want.
GHREB: Are you available to help folks out with their budgets?
Kyle: I’d be happy to sit down and talk with your clients.
GHREB: Terrific! And thank you for your time, Kyle.
Kyle Bergquist is a financial advisor at Conifer Investments, a boutique investment firm that specializes in folks with complex financial situations like multigenerational families and entrepreneurs. Kyle is also a licensed REALTOR and supports Amy’s residential real estate practice. He is a regular contributor to the Greater Hartford Real Estate Blog and can be reached at KyleB@AmyB-RE.com.