You understand the benefits of homeownership. Now, where to start? How much will owning a home actually cost? How should you choose your first home? There are so many questions that go into the home-buying process.
Below you will find two of five important questions to ask to help you in your home search.
1. How much can I afford? A good rule of thumb is to have 28 percent of your net income go toward your home payment. Anything between 25 and 32 percent is considered manageable, but a higher ratio puts you at risk should your financial situation change. A rise in insurance costs or the loss of a job could make things difficult, but if you are spending a quarter of your earnings after taxes on your mortgage payment, you should be safe.
2. What are my other housing costs other than the loan? Be sure to have a thorough conversation with your lender about out-of-pocket expenses such as down payment and closing costs. Also, take into account any possible home improvements you plan to make, and have contractors give you estimates. Other expenses that need to be considered include taxes, homeowner’s association dues, utilities and home insurance.
3. What should I look for in a house and a neighborhood? Determine what kinds of activities are important to you. Do you want to be near a gym? A park? Good restaurants? Also take into account how you will get to work. Is there a bus stop nearby or will you drive to work? Try driving to and from a house during different times of the day before you make your decision.
4. Will this house fit my long-term goals? It’s a good idea to consider future plans when buying a home. Do you plan on having children? Could an elderly relative be moving in? Do you need a home office? Also consider schools if you plan to start a family. It can be cheaper in the long-run to pay more for a house in a better school district than to buy a less expensive home and pay for private school.
5. Am I truly prepared to be a homeowner? Be prepared to spend time and money on your home. Understand everything that is involved in owning a home, from maintenance repairs, and landscape to homeowner’s insurance and property taxes. Ask yourself if you have good spending habits, and possibly take a homebuyer class online or in person. Also, be aware of your credit score and how it affects your ability to purchase a home.
A licensed Realtor and Loan Officer can help guide you further. These questions can help you determine the right course to take when buying a home. Please don’t hesitate to contact us if you are in need of professional mortgage guidance.