Let’s face it., homeownership is a big deal…a very big deal. Regardless if your client buys a home on their own dime or with a spouse or partner, your client needs to get an honest, realistic grasp of her finances, her spouse/partner’s finances and a very clear sense of the true costs of homeownership. Why? Because for most homebuyers, particularly first time homebuyers, a house will be the largest and most long term financial commitment of their lives.
For the last several years, real estate firms, lenders and individual agents have “helped” potential homebuyers determine the cost of homeownership by installing online mortgage calculators on their respective websites. With just a few clicks, potential buyers can input their personal financial data, the financial data of a researched house they’ve been considering and voila, the buyer knows how much it would cost her to own that home.
Not so fast says the Consumer Financial Protection Bureau (CFPB). First, according to the CFPB, online mortgage calculators tend to consider only the downpayment amount and the interest rate on monthly loan payments to the lender as costs of homeownership. There are many, many other factors (property taxes, private mortgage insurance, homeowners insurance, utilities, upfront closing costs, etc.) that must be included in order to get a full picture of homeownership costs. If those factors are not included, homebuyers, particularly inexperienced first time homebuyers, go way over budget or simply pull out of the deal once they learn the true, inclusive financial reality of homeownership.
And secondly, also according to the CFPB, the personal financial data a potential homebuyer inputs into online mortgage calculators to help determine interest rates is only as accurate as the person provides. Remember that interest rates depend on accurate financial information such as credit histories, the type of loan, the person’s income, the person’s debt, the specific lender, etc.
Zillow’s recent development of Realestate.com is trying to overcome that issue. Just one month ago, Zillow debut this site as an effort to offer homebuyers an all-in-one monthly pricing tool that includes every possible monthly expense involved with homeownership. It also offers a breakdown of closing costs for each property listed on its website by using available location data for each property.
Zillow created Realestate.com for both buyers and renters to make ideas of affordability more accurate and to make budgeting a priority. (Renters too tend to think that their only monthly cost is that for their rent. Renters too have to pay utility bills, insurance, etc.) Realestate.com’s all-in-one monthly pricing gives potential homebuyers and renters a much fuller picture of homeownership costs. Once she understands that accurate picture, your client will be ready for you to introduce her to the first residential listing that makes actual financial sense.