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When you are going out to buy a home there are a lot of things to consider, however, one of the most important things to consider are finances. Whatever type of home you end up buying should be a home that you can realistically afford to purchase. Buying a home you can afford will not only save you help from potential financial ruin, it will also be one less factor of stress in your life than you would have if you had to worry about how you were going to pay the mortgage every month.
Too many people today struggle with their mortgages because they are spending the absolute maximum they can get a loan for, or even worse, are taking on a mortgage that their household income cannot realistically support. Overextending yourself when it comes to buying a property can cause your family to struggle financially in other areas of life. It can also be a major source of stress in your family's future.
The following are some key financial do's and dont's to keep in mind when purchasing a home. These points are designed to help you find the home your family needs, yet ensures that you do it while you are still on a budget. Having said that, keep the following advice in mind when determining the financial do's and dont's of how you will purchase your next home:
Financial Do's of Buying a Home
DO ensure you have enough may saved for an appropriate down payment for the loan you are taking. Loans require anywhere between 3% and 20% of the total of the purchase price of the home as a down payment, but more is always acceptable.
DO check your credit score so you know if you will be able to be approved for the kind of mortgage you want to apply for.
DO use a home affordability calculator to determine exactly how much home you can afford to eliminate the guesswork.
DO ensure you are budgeting appropriately for closing costs on the home you are purchasing as those costs can add up fast and be completely unexpected.
DO stay under your pre-approved budget limits in order to avoid stretching your finances too thin.
DO research local and state assistance programs for buying a home if your income qualifies your family for such assistance.
DO hire a skilled, knowledgeable buyers agent that knows the area well to help you in the purchase of your new home.
DO make a strong offer that the buyer can at least negotiate with.
DO be prepared to compromise to get the home you want. You may not get the exact price you want, but any money that you can get the seller to take off of the list price is progress.
DO set aside extra money to spend after you move in as you will have to outfit your new home with furniture and households supplies and this can be a lot more expensive than most people think.
Financial Dont's of Buying a Home
DON'T buy a home unless you plan to stay there for a period of time, otherwise you are throwing money away on closing costs only to do it again when you have to/choose to relocate again later. If you are only staying in the area for a short time due to work or family circumstances, renting may be a wiser option.
DON'T just assume all you have to do is pay the mortgage each month. You have to factor in property taxes and homeowners insurances as well as the cost of maintaining and repairing the home when things break. Unlike rentals, homes that you own are your responsibility to fix things. For example, the air conditioning breaks or the dishwasher needs replaced, it's on you! Plan for these costs so you are not blindsided when you have to fix or pay something extra.
DON'T use your retirement funds to purchase a home. If you can't afford the down payment, closing costs, and mortgage outright without raiding your retirement accounts or emergency funds, then you are buying a home that is too expensive. You will needs these funds later in life, so don't spend them foolishly now.
DON'T take on any new debt at the time you are closing on your home. The more debt you take on the less home you will be able to afford as you will have more financial obligations outside of your mortgage payment. That means less disposable income to spend on mortgage payments and the less house you can afford.
Avoiding these simple financial do's and dont's when buying a home can help save you from future financial struggles paying your mortgage and being able to afford the home you purchased. Be wise with what you purchase and stay within your budget so you can find a home your family will love and enjoy for years to come.