Wouldn’t it be nice if getting a home loan was easy? You could walk into the bank, request the money, and leave with a check to purchase your dream home. Unfortunately for us, this isn’t how things work.
When you visit a loan officer, he/she will crunch numbers to make sure you can afford the house payment you are asking for. Professionals want to be positive you can pay the money back.
Two numbers at the top of the list are front-end debt-to-income and back-end debt-to-income. You have to prove that the home loan you want is less than 22%-33% of your earnings. They will also make sure that the total of your debts, combined with your house payment, don’t exceed 42%-45% of what you bring home.
Before you strut into the bank, think about these numbers yourself. You may realize that your expectations exceed what you can afford, and looking for a cheaper house may be the next step.
Follow these three steps to feel confident that the big home purchase will be something you can afford to dive into.
#1: Be Honest With Yourself
The bank lender will only account for expenses that can be seen. Only you truly know where you stand financially. If you are experiencing hard times making it through the week or month, adding an expensive loan to your bills isn’t a great idea.
Don’t drown yourself!
#2: Expect More Than Just the Mortgage
When buying a home, you receive an added bonus paying house insurance and taxes. Yay! Your house payment may be less than rent, but don’t forget about the hidden costs a homeowner is in charge of.
Other changes may be found in utilities. More energy, heat, air conditioning, and maintenance will be required as a homeowner versus a renter. Are you ready to give up weekend entertainment activities to save time and money for a home?
#3: You Will Spend Money
You go to a home-showing and think, “This house is perfect. We won’t have to put money in it for a while!” Wrong!
No matter how great the house is, you are going to spend money. It could be spent buying a gallon of paint or updating window treatments You will also spending money customizing the home to make it your own.
What to Walk Away With
It is never a good idea to jump into something like a home loan without doing your homework first. Think through these points, and visit a lender with confidence that you are making the best decision for your future.
Need help managing finances or getting them back on track? Our specialists are here to answer your questions, so give us a call! We’d also love to hear from you regarding your first experience buying a home.
What do you wish you would have known!?