To begin, for the sake of readers unfamiliar with the term “home financing,” it is simply the concept of buying your first home. So, if you’re reading this, I suppose this makes everything easy. Buying your first home can be exhausting. You have to cross all ‘Ts’ and dot all ‘Is’ to avoid making regrettable decisions.
We assume you’ve identified your dream house in the perfect city. Before you start saying goodbyes or getting too excited: are you financially prepared to become a homeowner? Answering this critical question could be the thin line between the finest to the worst decision you’ve ever made.
So, this brings us back to the topic: should you finance your home now?
Well, your finances (or pockets as they call it) will answer this.
Your financial status is the primary factor to consider before settling for a new home. What’s your might? Are your finances capable of forking out roughly $200, 000 as down payment (usually 3-20% of the sale price) on your home? The figure might not be as high as this and could be higher; it depends on your choice and options.
For instance, buying a home in Atherton, California, costs as much as 10 million dollars, and you’d be paying above half a million at first, no matter your mortgage plan. In other cities like Alabama, meanwhile, you can buy houses for as low as $300, 000.
As financial stability can be subjective, you can calculate it yourself to see how you fare. To do so, compare your gross monthly earnings to debt obligations and expenses to find out if you should even be thinking of a home now. You can find several home affordability calculators at cheap costs online. These calculators will help estimate the price of homes suitable for you in the city of your choice as well as guesstimate the amount you could (and actually should) owe in homeowner insurance and property taxes. Experts advise that the total mortgage costs should not be more than 20-30% of your gross annual income.
This brings us to your pre existing loans…
At least 70% of Americans who go to college are soaked up to the neck in loans. It may be spectacularly unwise to add to your burden if your income is not enough to cover for your mortgage payments as well. You may require the services of a financial expert here to take a look at your finances and suggest recommendations. This may cost a bit, but it’s often worth it.
If you’re still willing to go ahead after all calculations and recommendations, you can then consider other factors. These include the mental readiness and the impacts a move would have on you, family, or career. No expert would advise you to leave a city where you’re earning $50, 000 monthly for a city you’re uncertain of your finances, except he’s interested in your job. Also, how would it affect your family? Will the kids have access to excellent educational systems? How about your partner? Is this the right time for him or her?
If you answer every question above positively, then stop doubting. You should finance your home now!
Adam Lantelme
With rates this low I don’t know how anyone could afford to not at least look at re-financing!