Whether you’ve just finished school, starting a family, or tired of renting, buying a home can be one of the biggest financial decisions of your life. But as you’ll soon discover, there are a number of considerations you’ll need to make. There’s a lot of misinformation nowadays about buying a home and home loan requirements and it can be difficult to know where to start. Read on below for three questions that will help you get started on making a decision on whether now is the best time to dive into the market and buy a home in relation to your personal situation.
Do You Have A Down Payment?
There are a lot of numbers mentioned when it comes to the down payment. Many people still think you need 20% to buy a home. Not true. There are multiple low-to-no down payment options ranging anywhere from 0% – 5% down payment as well as down payment assistance grant options. Of course, 20% is an ideal percentage to put down in a perfect world because it enables you to avoid paying Mortgage Insurance (PMI or MIP) and lowers your overall payment and cost of home ownership. But, more than likely it won’t outweigh the cost of waiting to save up for the entire 20% due to rising interest rates and rising home prices. By the time you wait to save the entire 20%, mortgage rates and home prices may have risen to a level where the 20% doesn’t offset the difference. It’s also a better to ensure you have money leftover after closing in an emergency savings account (liquid vs. tied up in home equity) instead of using all of your entire savings just to make a large down payment. On the contrary you don’t want to go with a no money down loan option just because you have absolutely no money in savings – again walking into home ownership with no savings at all. Talking to a mortgage professional that offers all of the options along with experience and expertise should be your first step when considering buying a home. Get pre-approved here for free.
Will You Struggle To Make Ends Meet?
Lower mortgage rates can certainly improve your overall outlook for investing in a home, but buying a home can be financially debilitating for many people. While you’ll be required to make your monthly mortgage payment, there will also be home maintenance and other associated costs that add up. If you feel it’s going to be a huge financial risk to sustain home ownership, it may be worth sitting down with a mortgage professional to go over the numbers. Don’t spread yourself thin just to own a home. Don’t blow your entire life savings on the down payment and get into your home with absolutely no emergency savings fund because if something goes wrong with the house or needs repair you don’t want to have to finance your weigh out of the problem and add to your debt load.
Are You Ready For Ownership?
Home ownership is often considered a rite of passage as one gets older, but it’s important to determine how a new home will fit into your current lifestyle. The costs of home ownership are usually higher than renting due to maintenance and you’ll have to take care of things like the yard and general home maintenance yourself. It might not be the best time if a home strongly imposes on your lifestyle, but if you’re looking forward to domestic duties, it can be a step in the right direction. It’s also an opportunity to start building some real long term wealth as opposed to your landlord’s.
Mortgage rates have been hovering relatively low for a few years, but it’s important to know that home ownership is right for you before moving forward. If you’re currently contemplating a home in your area, contact your trusted mortgage professional for more information.