The idea of having a place to call your own where you can raise a family is wonderful. Be that as it may, purchasing a home is a huge undertaking. From a 15 to 30-year mortgage obligation to the costs of maintenance and repairs, homeowners are financially responsible for a lot. Keeping up with these expenses and avoiding adverse consequences ultimately requires you to have control over your finances. If you haven’t completed the financial steps listed below, you’ll want to conquer them before you start searching for your dream home.
Get Serious About Debt Management
Carrying too much debt as a potential homeowner isn’t ideal. For starters, mortgage lenders review your debt to income ratio to determine if you’ll be able to afford your monthly payments. Not to mention, creditors can put in an application to place a lien on your property as a means to collect outstanding balances on your account. If approved by a judge, you may have to pay the lien in full or risk losing proceeds if the home is sold or foreclosed.
Ideally, having a debt to income ratio of 35% or less will help you acquire a mortgage you can afford. Review your credit reports and devise a plan to get rid of accounts with large balances. You can negotiate an affordable monthly payment with creditors or ask about a settlement amount so you can pay the account in full. If you’re really overwhelmed with debt management, you might visit sites like MemphisAssociates.com for assistance with consolidating them into one low monthly payment. Not only does this improve your debt to income ratio, but it can also boost your credit score.
Understand The Cost of Homeownership
There’s more to owning a home than paying for the mortgage. There are associated costs that you’ll be responsible for on an ongoing basis. Before you begin looking at potential properties, you should clearly understand what you’re in for. You’ll have to cover the down payment, closing costs, monthly mortgage payments, insurance, taxes, utilities, maintenance, and repairs.
While there are online calculators you can use to determine your mortgage and insurance payments, you’ll have to do a bit more digging to get the average cost of other expenses. For example, property taxes will vary by city and state. If you know where you plan on living, you can get an average to include in your budget. Finding an average for things like utilities, maintenance, and repairs will depend on your geographical location, the size and condition of the property, and the average estimate for contractors in your area.
Know What You Can Afford
Lots of Americans are currently facing foreclosure because they purchased a home they could no longer afford. While unforeseen circumstances could leave anyone in this position, you can reduce the likelihood of this happening to you by buying a house within your financial means.
If you’ve analyzed your debts and expenses and researched the average cost of owning a home, you can compare this data to your income to determine what you can afford. Most experts recommend that you try to keep living expenses to no more than 20% of your income. If the home you’re interested in purchasing is more than you can reasonably cover, you may want to hold off and increase your savings or income to ensure you don’t bite off more than you can chew.
With mortgage rates lower than they’ve ever been and the housing market at an all-time high, now is the perfect time to consider homeownership. Though the idea of securing a place for you and your family to call home is exciting, selecting a house without doing your due diligence can have emotional and financial consequences that takes years to recover from. By taking the time to complete the financial moves listed above, you can secure a residence that has everything you wanted at a price you can afford.