Most people have an idea of their perfect home. They picture the kitchen, floorplan, yard, and maybe even the neighborhood. However, when it comes to buying a home, it is important to shop wisely. At Andraya Coulter, we have discovered that most individuals who are interested in buying a house end up spending more than they can afford.
The following are a few important home buying tips that will help you make smart financial decisions.
1. Do Not Spend Beyond Your Means
Purchasing a house is one of the largest expenses for most American households. Mortgages can end up consuming as much as 37% of their annual income. This easily leads to bad debt when you overextend yourself and need money to cover your bills. Getting a house that exceeds your budget could easily become a debt trap, making you pay for a long time.
2. Keep Your Mortgage Payments Low
Purchasing a reasonably priced house is an easy way to improve your credit rating as it will boost your credit score. An affordable house will keep your mortgage payments low (below 25% of your income), which will give you a better standing with lenders when they calculate your Debt-to-Income ratio (DTI). DTI is a silent but important factor that lenders consider before they give out new loans as it is an indicator of whether you will be able to repay or if you will default.
3. Save Money
Buying a property that is comfortably within your budget can help you save money. Most individuals buy a house that is much more expensive than what they can afford and end up without sufficient funds for repairs and upgrades. It is better to upgrade your house as your income increases so that you can save your extra cash for investments and emergencies. You could also put some of the money you save towards getting a new house when the time is right.
4. Avoid Becoming House Poor
When you purchase a home that takes up all of your reserve cash and most of your monthly income to pay off, that is considered being house poor. This usually happens when you buy a home before you are ready or end up choosing one that is beyond your budget. Avoiding house poverty is important for your financial health. You can avoid this by sticking strictly to a realistic budget and making sure the mortgage payments will be an amount you can afford in the long-term.
5. Customize Your Home
Choosing an affordable house is the first step to ensuring your financial future and comfort. Instead of buying an expensive house property, you can customize the one within your budget by painting some walls, planting a garden, or getting new curtains. Adding these personal touches will help to make you feel more comfortable in the home you purchase.
In this guide, we have outlined some tips to help you make a financially smart decision when it comes to buying your home. Be sure to contact us at Andraya Coulter for any assistance regarding financing your mortgage once you’ve identified your next home.