Buying your own home can be exciting and frightening at the same time. George Mason Mortgage suggests considering the following questions when choosing your first home:
1. How much money do you have saved up?
Start with an evaluation of your financial health. How much do you have saved for a down payment? Down payments are typically 3 to 20 percent of the price of the home. Be sure to keep enough in savings for an emergency fund. It’s a good idea to have three to six months of living expenses to cover unexpected costs.
2. How much debt do you have?
Consider all of your current and expected financial obligations like your car payment and insurance, credit card debt and student loans. Make sure you will be able to continue to make payments in addition to the cost of your new home. Aim to keep total rent or mortgage payments plus utilities to less than 25 to 30 percent of your gross monthly income.
3. What is your credit score?
A high credit score indicates strong creditworthiness. A low credit score can keep you from qualifying for the home you want or receiving a low interest rate on your mortgage loan. If your credit score is low, you may want to talk to a credit counselor to evaluate your options.
4. Have you factored in all the costs? Create a hypothetical budget for your new home.
Find the average cost of utilities in your area, factor in gas, electricity, water and cable. Find out if you will have to pay for parking or trash pickup. Consider the cost of yard maintenance and other basic maintenance costs like replacing the air filter every three months. If you are planning to buy a home, factor in real estate taxes, possible mortgage insurance or maybe a home owner association fee.
5. How long will you stay?
Generally, the longer you plan to live someplace, the more it makes sense to buy. Over time, you can build equity in your home. Carefully consider your current life and work situation and think about how long you want to stay in your new home.