Buying a house is often the largest financial investment a person makes in their lifetime. As exciting as the experience can be, there are many ways in which new homeowners can see a financial downfall. To be financially successful, it is important to be properly prepared when it comes to savings, budgeting, and anticipating costs.
Pay off Your Debts
Getting out of debt will help when it comes to securing a mortgage loan. Your debt-to-income (DTI) ratio will dictate if and how much you can borrow from a lender. The DTI ratio is determined by dividing your monthly debt obligations by your gross income. The less debt you have, the lower this ratio will be, and the better chance you have for a higher loan amount.
Have an Emergency Fund
Emergencies happen, and it’s better to be prepared for them rather than find yourself in financial ruin. It’s highly recommended that you slowly accumulate an emergency fund to pay off any unforeseen circumstances. Emergencies can present themselves in many ways, including job loss, car accidents, medical expenses, home repairs, and more.
Make a Budget and Stick to It
Knowing how much you can afford to pay monthly will determine your price range when searching for a home. There are a lot of factors to consider when planning a budget. Make sure to factor in the following:
- Monthly mortgage payment
- Homeowners insurance (HOI)
- Property taxes
- Utilities (electric, water, pest control, garbage collection, etc.)
The most important part of having a budget is sticking to it. While it may be difficult to resist buying that cute lamp or choosing to cook at home rather than going out, the peace of mind that comes with knowing you’ve stuck to your budget is well worth it.
Keep Good Records
Make sure that you keep a copy of all paperwork. Organize your bills in a way that makes sense to you. Having a record of costs and payments will make it easy for you to see where your money is going. Consider reviewing these records regularly for accuracy and to see if you need to make any adjustments to your predetermined budget.
There are numerous factors to consider when it comes to buying a house. Ensure you are properly prepared by understanding the best ways to stay financially stable throughout the process. If you are looking to buy or sell your home, Posh Properties can help you get the most for your dollar. Contact us today to get started!