Financing Your Purchase-Finding Your Comfort Zone (First Time Buyers Series Pt 1)

Congratulations! You are thinking about investing in home ownership. That is wonderful news! I’m sure you have a lot of questions. This series for the First Time Buyer (FTB) will talk about steps to take when buying a home.

Taking the First Step

The first and most critical step, in my opinion, is getting really clear about your finances. Often times when I speak to a FTB, they don’t understand the importance of this step. You definitely want to speak to a lender. This can be your bank where you do your banking or a mortgage lender. It is best if you get a couple of opinions too. They each have different loan products, interest rates, fees and one might be a better fit than another.

Next, you want that person to go over your income and credit report and tell you what they can “pre-approve” you for. This is the jumping off point, but not the most critical step.

Budgets Do Matter- Here’s Why

The important step that many miss is doubling back around to your home budget to confirm you can in fact afford those payments. For example, if a lender tells you that you qualify for a loan amount of “X” and the payments are $2000 per month (principle and interest) you need to make sure that you actually have that amount available each month. What they don’t take into consideration are the things you spend each month that are not on your credit report. If it’s not on your credit report, they don’t know about it. For example, you may have daycare payments, or maybe you eat out 5 days a week due to travel, or your kids have dance class that costs “X” per month. Take the time to make sure you account for all the monthly fees you have.

It is not realistic to say… “I just won’t eat out for the next 24 months”. I have watched many a buyer get very frustrated and feel like they are trapped because they didn’t plan their purchase to be comfortable spending wise.

Also, property taxes and insurance you need to plan to save each month as well. Some loans add these into the loan, many do not though. So make sure you know what you are paying for.

Take into account that you should be saving something each month toward a savings account. You always want to be able to save. You should have an emergency fund for say $1000-2000 in case of an emergency like the dishwasher breaks or the hot water heater fails, or frozen pipes in the middle of winter.

Plan your home budget so you can live and not be strapped. Find your comfort zone.

If you’re not sure where to start (you’re not alone on this – trust me we’ve all been there) send me an email at lglopez@homealliancerealty.com