There’s no doubt about it—buying a home is a big investment. You’re on the hook for a long-term mortgage, and responsible for repairs and any other unforeseen expenses.
But don’t get discouraged. If you have strong money management skills (and cash saved up), you may be ready for homeownership. Here are some signs that you’re ready to take the leap, and things to take into consideration as you plan ahead:
You have a healthy savings account.
Of course you need to have enough cash to cover a down payment for a home, but you also want a cushion for additional costs. The initial price rarely is the final total on the day you sign on the dotted line. Plan on closing costs adding up to 5% to your budget; and have at least 20% of the home’s cost for a down payment if you want to start building equity right away (although many lenders will accept less).
Additionally, it’s smart to be prepared for unexpected costs. Lack of insulation, leaky pipes, or an old water heater or heating/cooling system could wipe out your nest egg. Even better – have a home inspector look the house over and identify potential issues before you buy it.
If you live or have lived in a property owned by someone else, you probably haven’t encountered property taxes, homeowner association fees, mortgage insurance, and property insurance. Be sure to take these additional amounts into account when considering what you want to pay for a home, and keep in mind these costs will increase over time.
You have good credit.
When it comes to buying a home, your credit score will have a big impact. In addition to determining whether or not you get a loan, your score will affect your interest rate.
If your credit isn’t high enough to get a good deal that feels comfortable to you, take some more time to build it. You can increase your FICO score (a credit scoring model that helps lenders assess risk) by reducing debt, making timely payments, not shopping aggressively for credit, and keeping at least one credit card for a long period of time.
You’re mindful of your budget.
Taking on a mortgage will likely increase your monthly expenses. Are you financially prepared? Unless you’re due for a windfall, you’ll have to re-organize your budget.
Most lenders require that total housing costs not exceed 28% of gross monthly income, and total debt payments per month (including the mortgage) not go beyond 36%. So for example, if you have no consumer debt and have a total household income of $75,000, $1,750 per month in housing costs is within your range.
Are you ready?
Nusenda’s knowledgeable mortgage loan specialists can provide you with smart, savvy solutions to make your home purchase simple. They’ll help you explore all the mortgage options available to you such as VA, fixed rate, and FHA. You’ll also get competitive rates, and fast, locally based decision-making. You can start your application process online, visit a branch, or call 505-855-5950 (800-347-2838 outside the Albuquerque area).
We also have a comprehensive Mortgage Resource Center, which features helpful information on home loan programs, current rates and fees, and rate calculators; or attend one of our no-cost, no-obligation Mortgage Workshops and get practical, hands-on assistance.
Need a little more time or help laying out a sound financial plan?
Do you need help building a plan so you can find a place to call your own? Whether you need to lower your monthly payments, or you’re looking for a way to pay off debt faster, let Nusenda help. We offer solutions that can help manage your debt, lower your stress, and simplify your life by discovering plans that work for you and your best interest.
- To make sure your finances are in the best possible shape, take advantage of BALANCE, Nusenda’s no-cost financial education and counseling service. Schedule a phone session on days and times that work for you – including evenings and weekends – and come away with a written action plan outlining your options, choices, rights, and responsibilities. We also have a series of complimentary, monthly webinars on a variety of financial topics.
- SavvyMoney is a no-cost, anonymous, easy-to-use online tool that help you analyze your financial health. It assesses where your money is going and builds individualized, realistic budgets based on your information; and offers tips based on the specific challenges you face.
- Make sound financial decisions with the help of our financial calculators. They’re useful for a variety of life’s milestones, from savings to loans, cash flow to college costs, even investment to retirement. There’s a special mortgage category that helps you determine if you should buy or rent, and how much home you can afford to ensure your financial well-being.
- Loan consolidation can help make your payment process simpler by transferring multiple debts into a single new loan. You may even qualify for lower rates or new terms, which could also reduce your monthly payments. This includes low-rate Visa® credit cards with low- or no-fee balance transfers, or even auto loan refinancing.