Buying home is an exciting time; especially when it’s your first home. But before you dive in, it’s important to get your finances organized to truly figure out what you can and cannot afford. We put together a checklist for you that we think highlights some of the things you should consider before purchasing!
Pay Down Your Debt:
This tip is probably a given, but it’s very important. We also recommend looking at your credit score and credit report as well. Making sure that your credit score is at an OK place can be the determining factor in the interest rate you’ll get. You also might now even be approved for a loan. Ouch! Also, make sure to pay down your credit cards, continue to pay bills on time. This will only help your credit score to increase. A 720 or higher is ideal!
Have Money in the Bank:
I’m sure you’ve heard of the 20% rule for a down-payment. However, it’s not completely required, as you can certainly buy a house without that. There are many good reasons to put down at least 20% though. Doing so you’ll almost certainly avoid paying private mortgage insurance (PMI), or you won’t have to pay it very long. PMI may not seem like much, but if it adds an extra $100 to your monthly mortgage payment you can see why you’d probably want to avoid it.
Fine-tune your budget:
Regardless of what you have in the bank currently, buying a house is a long-term, year after year, month after month, expense that you’re going to take on. The first thing to figure out is how much you can absolutely spend. Remember, you don’t want to go house poor. Most people think about the mortgage and interest, but there’s more to it than that. There’s property taxes, possible homeowner association fees, and you might even pay more for utilities. Much more planning has to go into just being able to afford a mortgage.
Consider the length of your home loan:
Most people go with a 30-year mortgage, however, others try for a 15-year loan. The obvious benefit of choosing a 15-year loan is that it’s shorter, and you typically get a much lower rate. So, if you can do a 15-year loan, great. You’ll spend less, but plenty of people can’t swing that. Whatever you do, make sure you’re comfortable with the payment.
We hope you found this checklist helpful! As always, there’s plenty more to consider too, however, these are just some of the main things. For more information on our quality custom homes, feel free to contact us. We’d be happy to help you in any way we can!