Owning a home is still a cornerstone of the American Dream, but today’s buyers are far more aware of the financial commitment of buying. They understand how much a low-interest rate can add up, are aware of the once hidden costs of homeownership, and are buying as part of a structured financial plan. If you are nervous to buy your first home these tips will help.
Saving For Your Down Payment
There is a growing mindset shift from “What is the minimum I can put down?” to “How can I save to put more down?”. While you may be able to secure a loan for as little as 6% down, many buyers are saving for 20 or 30 percent down. The reasons for this are many. If you are nervous to buy it is likely due to the number of foreclosures during the housing crash. Keep in mind that most who lost their home put between zero to five percent down or had variable interest rates. Ease your nerves and reduce your risk by saving more before you buy. To understand the financial impact of putting even a few thousand more dollars down can make, use this interest calculator.
Pay Down Your Debt First
Shark and real estate expert Barbara Corcoran suggests that your mortgage payment be no more than 30% of your take home pay, and that your home cost no more than 4x your annual salary. This is a general rule for loan approval but does not guarantee approval. To reduce risk and increase peace of mind work with your financial advisor to determine the right time to buy, and what debt should be eliminated before you buy.
Don’t Invest All Of Your Savings
In addition to your down payment, you want to save enough money for home and garden improvements and repairs, appliances you may need to replace, and the cost of furnishing and decorating your dream home. The goal is to move in without creating new debt. Financial advisors also suggest keeping a 3 to 6-month cash cushion.
Buy What You Need
Another growing trend is to buy smaller properties or at the very least shopping under your loan amount. Just because you are approved for a $700,000 loan doesn’t mean you have to spend that much. In Loudoun County the median home is closer to $500,000 so there are plenty of options that are well under your maximum budget. Also, clearly define your wants and needs. Your home must be comfortable and functional. Make sure it has the number of bedrooms and bathrooms you need, but don’t lose sight of the varying costs of buying a home. For example, consider the monthly utility bill difference between an energy efficient home and a home that needs more energy upgrades.
Find Creative Ways To Save And Make More Money
As nervous as you may be to take on what is likely the largest financial commitment of your life, take advantage of the digital day and age we live in and find more ways to make more money. For example, freelancing to help you achieve your down payment faster. Also, find mini ways to save by adopting habits inspired by minimalism and the FIRE Method.
The team at Jerry Sardone Realty isn’t just interested in helping you find your dream home, but ensuring your home meets both your personal and financial goals. We are a low-pressure team who will provide you with honest insights as to which NoVA home is right for you. Reach out today to learn more!