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Are you house hunting or about to start? Today I'll share four crucial steps you need to take to not only be ready to buy a house but still have money leftover to enjoy it!
Saving for a House? Here's How You Need to Financially Prep
For many couples, buying a home is a huge milestone. It's probably going to be the biggest purchase you guys make, so you want to make sure that it's the right move for you.
There are four crucial keys to you guys should know about before you sign any paper or even go hunting for a house.
You can watch this week's marriage and money tip or read on to get what you need to know about getting a house you love and still have money to enjoy it plus more!
Setting Up Your Finances so You Can (Comfortably) Buy a House
The first key is to make sure you get your money straight before you buy.
You might be feeling pressure – ‘OK, we've been married for X amount of years. We make so much money. It's time to buy a house' – but that isn't the way you should go about it.
You want to make sure that buying a house still leaves you some buffer in your life.
Sure, it's a goal that you have, but there are other things you probably have at the same time too.
Make sure your finances are squared away for your dreams by eliminating as much debt as you can.
If you're carrying a high amount of debt please make sure you get rid of your high-interest debt like credit cards and pay off your car loans.
With lenders, they are looking at the amount of debt that you're carrying because that can affect how much mortgage you're approved for.
On the other hand, personally, you don't want this mortgage to be a noose around your neck.
Carrying around a ton of debt can make you feel trapped in a career or job because you have bills to pay and a house to keep up with.
Run the Numbers Yourselves
The second key is to go ahead and run the numbers yourselves.
When you're applying for a mortgage and you're getting that preapproval letter from a lender, they're going to give you their numbers.
that's not the whole picture though. I want you to pull up the spreadsheet and start running them yourselves.
You need to look at it from two sides. First look at it as a lender would – examining your debts, your assets, and what's going on currently with your finances and a general projection of where it can go.
I then want you to run it as people that are going have to live with this decision (because you are!).
What does that mean?
It means you want to make sure that you have some breathing room in your budget.
Now when your lender or your real estate agent figures out what you could potentially afford many times they're only thinking of the house payment and not the big picture.
Do you guys have other dreams? Do you want to save for retirement? Do you guys want to travel? Do you want to try to start a college fund kids. Maybe you want to start a business.
These are all things that most lenders and real estate agents don't take into consideration, so go ahead and take care of that yourself.
Base Your Mortgage on Your Take Home Pay
Now the third key is a general rule of thumb. It's something that's helped us given us the opportunity to not only buy a house but to still again has that wiggle room.
Make sure you keep your mortgage payments are about 25 percent of your take home pay.
It might seem like this is fairly conservative but really this is a potential help for you should something happen down the line.
It's better to have enough buffer should you lose a job or your hours get cut back or there's a change in contract.
You don't want to lose your home over a hiccup that becomes this financial disaster.
Build Up Your Down Payment
Finally, the last key is bigger is better when it comes to your house down payment.
If you have a larger down payment you can get a better rate on your mortgage and if you hit that 20% mark, you can avoid private mortgage insurance.
However if you don't have that much saved up, you can still build up a sizable down payment which can give you more options when it comes to buying a house.
Thoughts on Buying a Home without Going Broke
So there you have it four keys to making sure that when you buy a home it's not only something you sell right now but down the line, it doesn't feel like a burden.
You've probably that patience is a virtue. With buying a home it can also be a financial win.
You might feel some pressure even from well-intentioned family and friends – ‘Now's the time to buy. The market is hot. You want to get in before it gets expensive.'
Renting temporarily is not a bad thing and depending on your situation and where you live, renting could be a great solution.
That's because people who jump in when they're not financially ready their mortgage payments for the first five to seven years isn't even building any equity in the home.
Their payments are going towards interest. So if you want to get ahead of the curve make sure you get your finances squared away!