Are you in the market for a new home this year? What a wonderful (and often intimidating) way to start the New Year. I admit to browsing home listing sites, day dreaming about a pool and a chef worthy kitchen, but there are a few things to consider before purchasing a new home.
Create and stick to a budget. I asked JJ Montanaro, CERTIFIED FINANCIAL PLANNER professional (CFP™), how to determine how much home you can afford and he says, “Shoot for a total mortgage payment (including principal, interest, taxes and insurance) of less than 28% of your gross income (before taxes or any other deductions). This is a common ratio called the "housing ratio." To calculate the number, add your mortgage payment (principal, interest, taxes and insurance) along with any association fees and divide that by your gross income. Aim for this number to be no more than 28%, but of course lower is better.”
Consider “hidden” cost factors associated with a mortgage Loan fees, real estate fees, homeowners insurance (don’t forget additional insurances that may be required like flood or earthquake) and closing costs. Additionally, do you have enough saved for a down payment (and if not, do you have money to cover a mortgage insurance payment?)
Ask the seller about their bills. Request information about past utility bills, property taxes and homeowner’s association fees. This will allow you to create an estimate for your monthly expenses. Ensure the monthly bills (in addition to the mortgage payment) fit within your budget
Start a fund for maintenance and remodeling costs When looking at home, be realistic about the costs it will take to get the home to your ideal state and plan for unexpected upkeep items. Recent DIY shows have given my family a false sense of ease in completing some home maintenance tasks. Don’t be fooled like we were and know when to hire a professional (and budget for it as well!)
Don’t forget the cost of moving. Boxes, transport and packers can add up quickly. It is also important for military families who aren’t sure of their tenure at a duty station to ensure purchasing (and affording a home) will be possible with an unforeseen move and the inability to sell the home.
Despite the seemingly intimidating financial factors, purchasing a home can be fun and rewarding. Share your home search journey and your tips for making one of the biggest purchases in your life a success!
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About the Blogger: Briana Hartzell is a Navy spouse, mother to two beautiful girls (4 years and 1 year), a former full time USAA employee and a graduate of Texas A&M University. Briana writes at Being Briana, a blog focused on the joys that military life and parenthood can bring.
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
Views and opinions expressed by members are for informational purposes only and should not be deemed as an endorsement by USAA.
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