Making the decision to purchase a home is one of the most important decisions that you can make for yourself and your family. Building equity is one of the best ways to grow wealth, pay off debt and build your retirement portfolio. But before you buy a home, it is important that you prepare yourself mentally for your home purchase. The first step you will need to do is review your current finances. You should look at the money you have coming in and the money that you have going out. You can do this by starting with your cost of living.
Cost of Living Example:
Tithes
Rent/Mortgage
Car Note
Health Insurance
Utilities
Cell Phone
Internet
Car Insurance
Food
Gas
Gym Membership
Parking Permits
Student Loans
If you have student loans that are in deferment the lender will still count the estimated monthly payment against you. Make sure that you count this debt in your calculations if the payment will become due within your first year of home ownership. Health insurance is typically accounted for before your net if you work for an employer. If this is true for you then you can begin with your monthly gross net and subtract your cost of living from there. If you have no idea how much you spend for certain items such as food and gas, it is good to look at your most recent 60-day bank account and credit card statements. This should give you a clear view of your spending habits and help you identify where you can adjust. Once you know your cost of living, you can figure out how much money you will be able to allocate towards your mortgage. Then take that number, any parking and amenity fees that are applicable and add it to the amount that you pay in rent and you should have a good estimate of what you can comfortably afford.
Your next step is to look at your savings and see how much money you have saved to help you pay your down-payment and your closing costs. You can use savings from your 401k, stocks and other investment and retirement accounts. Your down payment and your closing costs are two separate costs that people typically group together. Whether you use a down payment program, put down 3.5-20% or use a VA loan, which requires no down payment, you will still need money to work your contract once you are under contract. If you want to learn how much home you qualify for, your homebuying options and the homebuying process, complete the contact form below today and schedule a 20-minute consultation with me.
