Buying a home is a huge deal and trust me you do need a homebuyer financial guide. It’s a life-changer so take it lightly at your peril. It is for most of us the most significant purchase we will ever make. The outcome can be a positive or negative depending on our preparedness.
The entire process can be stressful and for first-time buyers intimidating as well. However, it is not a given that it has to be this way. If you are ready emotionally and financially it can and should be an exciting and rewarding experience.
Only you can decide if you are mature enough for this step which many say is the litmus test for adulthood. But as far as your financial readiness is concerned, I can offer some guidelines.
1. You Have a Solid Financial Base
The first checkpoint in the homebuyer financial guide when you talk about committing to a mortgage is a reliable source of income. That is also known as a job. If you don’t have one, come to a full stop. You need to demonstrate that you have the means to pay a mortgage, as well as property taxes and insurance coverage every month. This amount should fall between 30-35% of your gross income for the month.
2. Homebuyers Financial Guide – Downpayment
Although many think you need to have 20 percent of the purchase price of a home for a down payment, that is not the case. If you do, great if not, don’t let that deter you. There are many different mortgage programs available that require a downpayment as low as three percent. Veterans can even get it done with no money down. There are also options available that allow a first-time buyer to be gifted the funds from a parent or fairy godmother! This is an important item to check off in the homebuyer financial guide.
3. Closing Costs Covered –
You will need more cash to
cover those pesky closing costs. The amount
necessary generally ranges from 2-5% of the purchases price of the home,
but a lender will give you an estimate
right up front. If you don’t have the money, you can stipulate in an offer to
purchase that you want to roll them up in the mortgage. Most sellers don’t mind
as long as you add that cost to their asking price.
4. Home Inspections, Moving Expenses, and an
The homebuyer financial guide cannot stress how important a home inspection is to the process. Average home inspection costs between $350-$400. This is not the item to cut to save money so don’t even consider not having one. Buying a home without an inspection leaves a buyer vulnerable to significant problems and expenses down the road.
No homeownership financial checklist would be complete without covering the cost of moving your stuff from one home to another. Moving expenses can run the gambit from free thanks to friends with big muscles and a truck to nominal if you only need to hire a U-Haul to supplement your muscle power. If a professional mover is required, the cost will vary depending on how much you are moving, the month of the year and day of the week.
At the end of the day when you have forked over all the cash on necessary
expenses, you should have some left over as a buffer against emergencies. Pipes
break unexpectedly, basements flood and tax assessments pop up. You can wait
for décor updates, but those above will require immediate attention.
5. You Have A Good Credit Score
The homebuyer financial guide woldnot be complete without talking about your FICO score. Never and I do mean not even for a second underestimate the value of an excellent credit score. While a fair to low score might eliminate you for a mortgage, a high score with earn you better terms including a lower interest rate.
Have you got all the
financial bases covered? Then maybe it’s your time to embark on the next phase
of your life – homeownership. Good luck!