Purchasing a new home requires financial planning. Unfortunately, many people are unprepared financially to buy a home, and eventually end up with financial troubles. There are many things to consider before even meeting mortgage lender or a realtor. You have to have an intimate knowledge of your own personal finances before making the biggest investment of your life!
Below are several questions you should consider thinking through before plunging into purchasing a home.
Considering my personal finances, is it better to rent or buy a home?
You need to compare the costs between buying and renting a home. The difference should determine whether it really is the right time to buy a home or is it better to rent for the time being. Remember, there are many costs associated with buying a home besides the mortgage and down payment such as home insurance rate and home owner association dues. Be realistic and accurate as possible in calculating the costs. Also, in calculating the mortgage loan payments, overestimate by setting a higher interest rate.
If you are comfortable with incurring the costs of buying a home and if you are first time home buyer, review state home buying programs. Some of these programs will offer down payment assistance or limited down payment options. Take advantage of these state programs that offer assistance to first time home buyer.
Will my financial situation benefit me during the home buying process?
You need to review your personal finances. Gather all the necessary documents to determine your financial situation. Get a copy of your credit report, your banking statements and personal budget spreadsheets. Reviewing the credit report and banking statements will determine how much of a home you can afford.
Next is to find out your monthly obligations, car loans, student loans, credit cards, child support, health insurance, personal expenses, or other debt responsibilities. These obligations are non-negotiable items that need to be paid for on top of your monthly mortgage payments.
With my current monthly obligations, how much can I afford to pay for mortgage?
Knowing your monthly obligations and credit information, you are then ready to calculate how much you can afford to pay for mortgage. The question is whether there's enough left over after monthly obligation is subtracted from your monthly income. Contact a realtor and provide them with your information, they can calculate the approximate home loan amount that fits your financial situation.Back to Top Ready to Search the MLS? Search for Homes Now!