By: Natalie Thomas
Noisy neighbors upstairs? Sick of living in mom and dad’s basement? Or just want to take part in the American Dream? Whatever your reason for wanting your own home, taking the leap can be both exciting and daunting. Yet, according to a National Association of Realtors survey, you’re not alone; the number of first-time homebuyers was about 47 percent of all home sales in 2014 [source: National Association of Realtors].
While thoughts of white picket fences and granite countertops might be dancing in your head, you don’t want to be carried off by a dream and left holding a serious bill. This is probably one of the biggest purchases you’ll ever make, so instead of making an impulse buy (like that pair of designer jeans you just bought), arm yourself with research and a few quality advisers. It can be the difference between years of loving the home you’re in versus wondering how long until you can look for your next one.
Let’s talk a few financial tips and tricks to know when you are building your new home!!!
You had to study up to learn how to drive before you got behind the wheel. It’s the same with buying a house. Making the wrong decision on your first house can come back to haunt you, so why not take a little time to learn from the pros and go straight to the head of the class with your investment knowledge?
First-time home buyer seminars are offered by a range of organizations, including city housing departments and non-profit organizations. You’ll get tips on shopping for a home, financing a purchase and even maintaining your home once you’ve bought it. Plus, many of the seminars are free.
The classic lending guideline says your principal, interest, property tax, and insurance (PITI) should amount to no more than 28% of your gross income.
Obviously, that’s an arbitrary number. Your financial world won’t explode if you stretch to 29% or 33%.
But an outsized mortgage payment is going to bite you sooner or later. As we’ve seen again and again over the last few years, lenders aren’t cuddly and understanding. They just want you to make your payments, month after month.
On top of debt repayment, you have other non-negotiable bills every month: utilities, insurance, a basic level of food and clothing, and maybe a tuition payment. Then there are discretionary expenses: saving, dining out, entertainment, travel, etc.
In their book, All Your Worth, Elizabeth Warren and Amelia Warren Tyagi recommend that you keep your non-discretionary expenses to less than 50% of your take-home income.
Like the other percentages we’ve been throwing around, this one isn’t magic, but it’s a nice guideline. When too much of your income gets sucked into required expenses, you lose flexibility.
A brief period of unemployment, a medical emergency, or a car repair can turn into a financial disaster that ultimately costs you your house.
Short of someone stealing your identity, you probably don’t check your credit report all that often. Most people find some sort of inaccuracy in their credit report. Being proactive and knowing what is on your credit profile can insure that you have access to the best interest rates possible. Sometimes, paying off your credit cards, or an old collection account actually hurts your credit profile more than it helps… isn’t that crazy? Working with a mortgage professional will help you create the best possible financial scenario while you are building your home.
Armed with just a little bit of an “EDGE” you will be able to have the MOST enjoyable building experience possible!!!
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