To buy a house? Do it right or don’t do it

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Your home should be your castle. Don’t let it become your financial prison.

I stole these words from some people in the hallway at the USAA, but imitation is the best form of flattery, isn’t it? Either way, the phrase underscores the need for finances to be front and center as you embark on what can be the very emotional journey of putting a roof over your head.

Here, I explore the idea that the right time to make a financial move depends, in large part, on whether you can do it responsibly. This is especially important in today’s volatile and increasingly expensive real estate market.

Here are a few checklist items that might indicate whether you’re ready to buy your home the right way:

Your ducks (the credit ones) are in a row. This means that you have checked your credit score, eliminated as much debt as possible, and avoided applying for new credit for several months. You are now ready to take on what will likely be your biggest financial obligation.

You’ve calculated the numbers and the house is within your budget. If you can cap your mortgage payments at 28% of your gross monthly income, you should be on the right track, although that number can fluctuate depending on your location and financial situation. The total should include principal and interest plus property taxes and home insurance. Beyond that, you need to budget for homeowner association dues, maintenance, etc. If you’re trying to keep your options open, spending less on the biggest item in your budget isn’t a bad thing.

You are determined not to bite more than you can chew. Just because someone is going to lend you money doesn’t mean you need to borrow it. Your lender shouldn’t tell you how much you can afford. Period. This is something you need to know before you start the home buying process.

You are squatting for the long haul. At a minimum, you should commit to owning a home for three years – and more is better. Keep in mind that buying and selling can cost anywhere from 10% to 15% of the value of your home. It doesn’t mean you have to live at home; you just need to be prepared to own it for an extended period of time. If a sluggish housing market or an unforeseen, permanent move makes you a reluctant landlord, you may want to reconsider your purchase now.

You are sitting on the money. Yes you need money to buy a houseeven if you get a loan from the Department of Veterans Affairs with no down payment. You may need money for closing costs, furnishings, or maintenance. Heck, I had to fix my roof, replace broken appliances and fix the air conditioning, all in a relatively new house.

If you are looking to buy your next home, make the decision so that your palace windows do not feel like they are covered with bars.

Go to the next stage

If you are ready to move forward or just want more information, the first step is to get quote without obligation.

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