Planning to buy a house can be the biggest decision of your life. But when you are all set to buy the new house, the first question that will strike your mind is ‘How much can I afford ‘?
There can be many questions on your mind that will determine when you should venture into new homeownership.
Having your own house has the advantage of building a huge wealth in life, but before that, you must think about a few factors that can affect your decision.
Here are some points you must consider before you take one step forward toward buying a new house-
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Are Your Finances In Order?
Do you have sufficient funds to purchase a house with cash payment? Yes, this can be the first and most apparent point. Even if you do not have much cash, an agent will advise you to qualify for the mortgage and become eligible to afford the house.
But again, there arises a question. How much mortgage can you afford? Compare your income in ratio with all your house expenses and calculate whether you will be able to pay the interest rate on the loan amount or not.
Will You Be Able To Pay Down Payment?
Being able to afford a new house today is not only important as your ability to afford it in the long haul. Down payment of your first house can only be the single largest investment of your life. It is always best to pay at least 20% of your loan amount as a down payment. Many banks do not provide you with a loan amount unless you pay a minimum of 5% to 10% as a down payment.
There can be many benefits of paying a larger down payment, but do not sacrifice your emergency savings by putting more down on your house than is required. In addition to this, you must also focus on the unforeseen costs associated with your acquisition, like the loan closing costs, appraisal costs and lender’s fee.
Balance Your Lifestyle Requirements
While money is the most important consideration, many other factors play a vital role in your timing of buying a new house. Suppose there is a baby on the way, an elder who will not be able to live all alone. What could be your next move to save those extras. You have to cut down on all luxury expenses like going out on the weekend every month, working out with a personal trainer, and ordering food from joints.
Before paying a mortgage every month, give yourself a little break and subtract all those expensive hobbies and activities from the payment calculated after preparing a list of all expenses. If this is also not working out as planned, step back and look for a less expensive dream house.
Look For The Market Condition
The real estate idaho market fluctuates as per the current ongoing situation. There are times when the market is depressed, and it is abnormally very high at times. If prices go low, you will get the property at a very good price. For example, during the COVID-19, there was a massive drop in the prices of houses.
Consider these 2 points:
- Interest rate – keep an eye on when interest rates rise and fall.
- The best period to purchase – Spring is probably the best time when you can have the widest variety to choose from.
CONCLUSION :
“Afford” is not as simple as it sounds. A host of all other financial and lifestyle considerations should interrupt your calculations. There are many pros and cons to buying a house, so it is important to know when you are ready to start the final process. But considering financial factors before you buy can prevent costly mistakes and fund problems later.
