Purchasing a home is huge financial decision, one that requires a lot of planning and considerations for your future. Here are three questions to consider before taking the step toward first-time homeownership, courtesy of Houselogic.com.
1. What Are Your Goals for the Next 5 to 7 Years?
Are you happy with your job and feeling content with how your life is going? Do you anticipate any career, family, or financial changes in the next few years?
If you’re considering growing your family or changing careers, factor into your budget any anticipated changes, such as extra room for a baby or an income cut. That’s better than taking a financial loss by having to turn around and sell your new property.
2. What Will It Cost to Both Purchase and Own Your New Property?
A general rule of thumb is to keep your PITI (principal, interest, taxes, and insurance) costs below 28% of your gross monthly income, while your overall debt-to-income ratio should be no more than 36%.
Are you buying a bigger space than what you currently have? Don’t forget to factor in increased heating and cooling costs. Also, plan for homeowner’s association dues if applicable.
In addition to the funds you have for your down payment, don’t overlook the following expenses you’ll incur once you purchase your home:
- Moving costs
- Closing costs
- Home repairs
- New appliances
I recommend opening a separate savings account in addition to your down payment fund to save for these expenses.
3. What’s Your Credit Score?
Your credit score is your financial report card, except it will follow you long after college. This number can either save or cost you thousands of dollars when it comes to locking in an interest rate on your mortgage. The lower your score, the higher your interest rate and the more you’ll pay to borrow from a lender. The higher your credit score, the lower your interest and the more money you’ll keep in your pocket.
If you have any issues on your credit report, tackle them as soon as possible.
Click HERE to read this article in its entirety.