Congratulations on the search for your new home.
There is so much to be excited for as you venture from home to home contemplating which will be best for you. Should there be a one car garage or two? Do we need a deck for outside fun or not? Purchasing a home will likely be one of the most expensive investments that you will ever make. Take your time and consider these money tips while shopping.
Determine how much you can afford
Have you ever heard the phrase don’t bite off more than you can chew? This also applies to purchasing a home. When purchasing a home remain mindful of how much home you can afford. My recommendation is that your monthly payment does not exceed 30 percent of your monthly net income.
Let’s do some quick math. If you net $5,000 per month, the mortgage payment should be $1,500 or less, that’s 30 percent of $5,000. Remember, you’ll still have your other monthly expenses— therefore, keep your monthly payment as low as possible.
Consider all costs even after you move in, such as utilities, monthly memberships, homeowners association (HOA) dues, and yard maintenance fees.
How much space do you need
Evaluate how much space you really need. Sure, those design magazines will have you yearning for a room to accommodate visiting parents, grandparents, another room for Brother Joe, and a separate playroom for the nieces and nephews, and don’t forget the screened in porch for the family cookouts.
Focus on how much space you really need for your immediate family. The less space, the less there is to clean up, and the less there is to heat or to keep cool. The larger the space the greater the expense will likely be.
Build a healthy savings account
Mishaps and emergencies are sure to come prior to and after moving into a new home. Oftentimes our focus rests on having enough for closing costs and the initial move but there’s a lot more to consider.
You will spend up to 3 percent or more annually on the upkeep of your home, repairs, cleaning, and day to day maintenance. Having a healthy stash of savings will easily combat many of those areas. Plus, it’s also an eye pleaser in the minds of many lenders when you have 3-6 months of expenses or even mortgage payments saved up. This also helps you to rest a little easier.
Strengthen your credit score
This is super important. Evaluate your credit carefully before searching for a new home. When it comes to credit you want to land the lowest interest rate possible and the way to do that is to make sure that your credit score is in good standing (I suggest a minimum score of 700+). This will allow you to stand a better chance of negotiating rates between lenders. Position yourself financially to get the best loan.
Research the costs of utilities in the area where you would like to purchase a home. Contact the electric company, gas company, and cable company to gain approximate numbers around what you should expect. Utilities for a home can be drastically different from renting a small apartment.
A great rule of thumb is to budget for 10 percent of your monthly income that will be devoted to utilities. Here’s the math, if you earn $5,000 per month that’s a total of $500/monthly to cover all utilities.
Take your time when searching for a home, there’s loads of homework and research that can be done to prepare you for one. Clear up the areas that need some attention prior to taking the leap. Focus on getting rid of some debt to lighten the load when you move. As previously mentioned, work on increasing your credit score and imagine your life a few years from now in that home.
Release the feeling of being rushed or anxious on this journey. Buying a home is a process, enjoy every moment!