Creating a Home Buying Budget You Can Live With
Taking the next step in life and preparing to buy a home can be both exciting and stressful. As you prepare for this huge step in life, it is important to keep a few things in mind to make sure you and your budget are ready for the big purchase. We’re here to help make sure you’re prepared with a few helpful tips to remember as you shop for your new home and mortgage loan.
Ideally, you want the lowest interest rate you can get. The better your credit, the easier it will be for you to secure a mortgage loan with a lower interest rate. You can work to improve your credit score by paying down current debt and making sure you always make your payments on time.
The standard recommendation for a down payment is 20% of the loan amount. However, there are also specialized mortgage loans that only require as little as 3% down. Talk with your mortgage lender to determine which mortgage loans you are eligible for and their down payment requirements. The more you are able to put down, the less you have to take out for the loan. A lower loan amount also means lower monthly payments, which leaves you with more room in your budget for other needed expenses. No matter what amount you decide to put down on your home, your monthly mortgage payments will help build your equity.
Monthly Mortgage Payments
The rule of thumb is to keep your monthly payments at or under 30% of your income. This also includes the cost of principal, interest, taxes, and insurance. You don’t want to put too much of your income towards your home expenses and not have enough left over for your other needs.
Maintenance and Fees
Buying a home can be exciting, but maintaining that home can get expensive. It’s recommended that you try to keep between 1 and 2% of your home’s value in a separate savings account. Many homeowners will purchase warranties. This will help to guard against any unexpected maintenance you may run into within the first year or two of ownership. And home inspections are always recommended, even if it’s not required for the home purchase. Inspections will prepare you for upcoming maintenance your home may need. If your home’s roof is little old, you can go ahead and start saving to have it replaced!
When purchasing a home, it is vital that you have some form homeowner’s insurance. This will protect your home against any unforeseen accidents or disasters, such as storm damage, fallen trees, etc. You may also want to consider insurances such as life and disability.
It is important to think about your life not only long-term, but short-term as well. How is your job? Is your career stable? Do you plan to relocate? Will your family grow, or will your kids move out? All of these can factor into your financial plans, not only for your home, but also for your future.
If you’re ready to apply for a mortgage loan, let our team help you get the loan you need. Visit our Mortgage Loan Center to learn more about the mortgage process, use our Home Buying Calculators to get a picture of what your home loan will look like, and check out our Buying a Home video series on YouTube for more information about home buying. Apply for a mortgage loan online or set up an appointment to speak with one of our Mortgage Loan Officers.
At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.