Preparing to Buy a Home
Exploring Mortgage Options
Getting Approved
Working With an Agent
Finding a House
Preparing to Close
Closing on Your Home
Managing Your Mortgage
Buying a Home with a Low Down Payment

Deciding if You’re Prepared for Commitment of Buying a Home

Buying a house is a big commitment, it is the largest purchase that many will make in their life, so before you start house hunting and shopping for the best rates, you should take the time to look at your current situation and understand how it may change in the future.

Some questions to ask yourself:

  • Are there any planned life changes in the next few years, like having kids or changes in your job, that could influence your financial situation?
  • Can you commit to staying in your home for the next five years?
  • Is your income stable?
  • Can you handle, or take the time to learn, house repairs? If not, are you willing to pay someone if something breaks?

How long do I need to own my home before it is paid off?

Typical mortgages are amortized for 30 years. This means that if you make the scheduled payments every month, it would take 30 years to pay your house off completely. You can also make extra payments to shorten this time, for example paying one extra payment towards principal each year can reduce the loan term significantly. There are also other factors, such as the housing market and how much equity you have in your house, that would give you the ability to sell your house when it is time to relocate or get a larger home. A good rule of thumb is to plan on staying in your house for at least 5 years to gain equity.

Both buying and renting a home have their benefits, so you should consider what matters to you.

Benefits of Buying

  • No landlord means you can make changes to your home, making it more personal to you, without prior approval.
  • Mortgage interest, unlike rental payments, can be tax-deductible.
  • Your mortgage payment will be constant, and will not fluctuate based on market conditions. Additionally once your house is paid off, you will no longer have a mortgage payment.

Benefits of Renting

  • Landlord is responsible to make any repairs to the house.
  • You do not pay property tax and are not required to have homeowners insurance.
  • Moving is easier since you do not have to first sell your house or find someone to rent it.

Take a Look at Your Financial Situation Before Buying a House

You should start by reviewing your bank statements to determine how much income comes in and what expenses are actually going out each month. Often there are small expenses that do not get factored but when you have a few of them, they can add up to being substantial. If you are going to be buying a house with someone else, you should also factor in their income and expenses. Then ask yourself these questions:

  • Do you have stable income?
  • Are you able to put money away for savings each month?
  • Is there a plan for managing your current debt?
  • Do you pay off your credits quickly, or do you make the minimum payments each month? (Low credit card balances increase your FICO score and allow you to enjoy better rates)
  • Do you have money saved for an emergency?
  • Do you have money saved for a down payment and closing costs associated with buying a house?

Determining Your Down Payment

How much you will need for a down payment is dependent on the type of loan and the sales price of the house. The more that you put down, the lower that your monthly payment will be. Conventional loans typically require at least 5% down, while FHA loans typically require 3.5%.

While considering how much to put as a down payment, it is important to consider that you will also have to pay closing costs that range from 2% to 5% of the home’s value.

You can use our mortgage calculator to help determine how much to put as a down payment to get the mortgage payment where you would like.

Why Choose Homewise Financial?

  • Application process is completely online.
  • Loan specialists available to answer your questions and help you understand the process.
  • As a mortgage broker, we have exclusive access to a vast network of lenders to offer competitive rates and diverse loan programs to suit your goals.
  • Personalized experience. We will “hold your hand” through the process to ensure your comfortability with the loan program and process.
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