Buying a home can be overwhelming. There is so much to consider: what features are necessities, what style home, what neighborhood, what school district, and so much more. But the number one consideration that should trump all others is whether or not you can afford it.
A home is a big purchase, and it can influence your life in so many ways. Make sure you are not setting yourself up for major debt or financial stress with this purchase with these tips:
Know how much money you have coming in: You cannot budget or plan a big purchase if you don’t know how much money you can spend. Take all sources of income into consideration.
Add up your monthly expenses: When buying a new house, you need to add the financing of it to your existing budget. Your other expenses won’t disappear, and you need to know where your money goes to each month before you add to those expenses.
Figure out the home-ownership costs: With the big financial picture in mind, figure out the maximum mortgage payment you can spend each month (consider 25% of your monthly income or less.) Make sure to breathing room in that budget for additional expenses like HOA fees, furniture, appliances, utilities, repairs, etc.
Work the numbers first: Most people go find a home and then look for a mortgage. You’ll never make a budget-conscious decision if you do this. Get with your mortgage professional first. Work the numbers on what you qualify for and more importantly what fits with your lifestyle and financial goals. Then you can shop with confidence, knowing that whatever home you pick, you can afford.
Allow your budget to grow: When buying a house, don’t go with one that will put strain on your finances or that is at the high end of your budget. You want to have breathing room, and room to grow. Life happens, and as time goes on you will need room for more items in your budget (having more children, unexpected illnesses, retirement, etc.) You may be able to afford that dream home now, but you may not be able to maintain that high mortgage payment long term.
Consider Your Financing Options Carefully: There are several options available to you. Don’t get stuck in your mindset of “only a 30yr fixed or15yr fixed loan”. If you are working with a professional you trust you should be able to have an honest conversation about your options. Be realistic about this home purchase? Is it a home you’re going to retire in or just because of a life change? Over 90% of Homeowners say they’re going to be in the home 10 years or more. However, according to the National Association of Realtors, less than 5% actually do this. I personally always do ARM loans because my wife and I are young and have a growing family. You can get basically the same rate as a 15yr note but you get a term over 30yrs. You get the best of both worlds. Whatever your situation, be honest about it and don’t walk in fear or out of tradition. The markets change constantly and you need to be able to adapt to it to maximize your purchasing power while staying in your budget and making prudent decisions for your family.
All blog information is of the opinion of the Loan Officer and is not supported by Fairway Independent Mortgage Corporation
