Far and away, one of the largest purchases nearly everyone will make is their home.
People put a lot of pride in their home. They buy all sorts of things to make both the outside and the inside unique and welcoming.
This is for good reason as the majority of people will spend most of their time over their lives in their home.
But, too often people jump into purchasing a home all too early.
In working with people in deciding when is the best time to buy a home and how to go about buying one, we’ve created a list for our clients to assist in this process.
Here are 5 Tips for Buying a Home:
1. Arrange Your Finances
Before deciding to buy a home, ensuring that your finances are in order is essential step number one.
- Having a solid budget in place
- Being debt-free
- Having a fully funded emergency fund (3-6 months of expenses set aside in easily accessible accounts.)
These steps are essential in forming the foundation for the future and should be practically mandatory before moving on to the next tip.
2. Determine if You Can Even Afford a Home
Having your own home is great, however not if it’s at the expense of your livelihood.
There’s three main questions that you should ask yourself before purchasing a home:
- Can I afford to make AT LEAST a 10% (20% would be best) down payment?
- Can I afford a 15-year fixed rate loan?
- Can I keep the home payments at or preferably below 25% of my monthly take-home pay?
Honestly look at these questions before deciding to buy a home.
One of the reasons these questions are so important is because you won’t honestly be able to even answer them until you’ve completed the first tip.
Purchasing a no-money down mortgage is simply asking for disaster to come, choosing a fixed rate loan that is longer than 15 years and spending over 25% of your monthly take-home pay is a sign you’re purchasing too expensive of a home.
3. Get Pre-Approved for the Mortgage and Plan for Extra Expenses
Getting pre-approved for a mortgage will increase your chance of getting the best deal when you go to actually purchase a home.
A few things to be aware of when starting the process are:
- Meet with an honest mortgage professional
- Get a good faith estimate breakdown of your mortgage that includes an estimate of the payment and interest rate.
- Use the good faith estimate when comparison shopping with mortgage providers.
Paying the down-payment isn’t all that goes into purchasing a home.
Plan for extra expenses such as property taxes, utilities, and homeowners insurance.
4. Make a List of Desires and Find a Good Buyer’s Agent and Home Inspector
Due to the purchase of a home being such a large and long-term investment, it’s important that it has the features your family desires.
A few common features to be thinking about are how many levels, the location, garage size, backyard size, and amount of bedroom and bathrooms.
Once you have your list, take it to a trusted Buyer’s Agent also known as a Realtor. Once you find a home that meets your needs, interview multiple inspectors to find one that provides a complete and detailed report.
5. Close on the Home
Before signing for the mortgage, you’ll want to make sure you get a property survey to determine the boundaries and possible easements/encroachments as well as a home inspection.
Once you approve of the home following the survey and inspections, make an offer with your real estate agent. Use the agent when making an offer, but ultimately the decision is upon your shoulders.
About Dane Financial, LLC
Dane Financial, LLC is a Registered Investment Advisory firm based in Springfield, Missouri that specializes in Financial Planning and Investment Management for Pre-Retirees, Federal Employee’s, and Millennials.
We offer the following products and services: retirement income strategies, wealth accumulation strategies, asset protection, tax minimization strategies, long-term care planning, and IRA, TSP, and 401(k) rollovers.
We are located on the third floor of the Bradford Place Building.