Owning your home seems like a dream that everyone in the world shares. The idea of coming home to your own place & being able to make modifications to the home at any point in time is something that every home shopper dreams of.
Before you decide to commit to buying your own home, here are some major things that you may need to consider.
Does It Make Sense To Buy A Home Rather Than Renting?
You’ve probably been told that it’s better to buy a home rather than renting a home. Buying instead of renting a home needs to make sense for you financially. If you’re currently renting a home you’re used to paying some sort of rent in exchange for living at the property.
Normally a rental payment & a mortgage payment aren’t very different. Use our mortgage calculator to help you understand how much a potential mortgage payment may be for you. Play with the slider at the top left of the screen until your payment is roughly the same as your current rent. This will give you the amount of a home you could afford up to for the same amount of money monthly.
There are multiple other things to consider when debating on renting or buying a home, learn more about them here.
What Other Financial Commitments Come With Buying A Home?
Buying a home involves several different types of cost. In this article you will learn about the two largest & most common costs associated with buying a home. Your down payment and your monthly mortgage payment. Your down payment is collected upfront with your home loan & your monthly mortgage payment will pay off the rest of the loan over the next 5 to 30 years.
Number One, Your Down Payment: Your down payment is the lump sum of money that you pay upfront for the property. Your down payment varies on several factors including; your type of loan, your current financial situation, & how you can get the best rates for yourself. In today’s market, 20% is preferred and often gets you the best rates from your loan officer. By putting 20% of the purchase price of the home as a down payment you can also avoid having to pay private mortgage insurance on your home loan. This can save you money monthly on your mortgage payment.
But What If You Don’t Have 20% As A Down Payment?
Mortgage companies understand that not every home shopper can afford to have a 20% down payment. This doesn’t mean you can’t get approved for a home loan, it just means you may only put the minimum amount required for your type of home loan. For example a FHA Home Loan only requires 3.5% as a down payment, whereas a Conventional Home Loan requires 5% as a down payment. If you can qualify for a Veterans Affair (VA) Home Loan you can qualify for a home loan with a 0% down payment.
Some homeshoppers can accept a gift from family or friends to help with their down payments. This must be carefully communicated to your loan officer, but is a common practice.
Number 2, Your Monthly Mortgage Payment: This is what you will pay each month to pay down your home loan. A mortgage in most cases will include the loan principal, interest on the home loan, homeowners insurance, & property taxes.
Your monthly mortgage payment may not be as much as you think & generally it’s about the same as you already paying in rent. Paying down your mortgage leads to building equity in your home loan.
Are You In The Right Mindset & Situation To Purchase A Home?
Owning a home is a long term commitment to not only yourself, but also your family. Are you ready to choose a neighborhood that you will be in for a long time? Are you ready to commit to not moving out of the city for a long time? And are you ready to purchase a home that will fit your lifestyle for the next 5 to 30 years?
After you do purchase your home, the work doesn’t stop there. Get ready for home projects, constant chores, & the other joys of being a homeowner.
The best way to know if you’re ready to buy a home is to find a real estate agent that you can trust & explain your situation to them. Your real estate agent can help you determine what you may need to do before purchasing a home.