Thinking About Buying a Home?

Category: Home Buying
By: Sente Mortgage

For most Americans, home ownership is the culmination of achieving the American Dream. The home buying process can be an exhilarating and overwhelming at the same time. Exhilarating because of what it represents and the excitement of searching for, and finding, your dream home. Overwhelming because there are new terms to learn, lots of paperwork to complete and many different people required to help make your dream a reality.

With an expert real estate and mortgage partners, a little bit of knowledge and prep work, buying your first home can be seamless and easy. With that in mind, let's dig into the big picture question:

How do I know if I’m ready to buy a home?

While there is no easy answer to that question, there are two major elements that help determine if you are ready to buy a home: lifestyle and financial. Below are some questions to consider that will make the process a lot more manageable and help you discover the answer to that big picture questions:

What is your ideal lifestyle?

The first element to consider in your homeownership decision is your lifestyle. Some questions to can help guide you are:

Does your current geographic location fit your ideal lifestyle or where you want to live? Or do you need to relocate?
Are you tired of sharing common walls with noisy neighbors? Do you want more privacy?
Is your family growing?
Do you need more space?
Do you want to make your living space ideal for you?
Has the rent been raised one too many times? Or are you paying as much in rent as you would a mortgage payment?
Are you able to deal with maintenance and repair issues?

When you focus on the reason why owning a home is important to you and how it fits into your lifestyle needs it helps you to more easily identify if owning a home is the best decision for you.

Owning a home that suits your ideal lifestyle provides a great deal of satisfaction by helping you build an environment that suits your needs. Once you have determined your needs, then you can begin to examine how to assess if your financial situation is ready to support home ownership.

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Is your financial house in order?

Wanting to buy a home does not necessarily mean that you are financially ready even if you qualify for financing. Following are some general financial questions to consider:

Do you have a budget and are you managing it on a regular basis? Managing finances is an important tool in home ownership and these days there are numerous budgeting and tracking tools that are free and easy to use!
Does your income exceed your expenses? How much money do you have in savings? How often do you save? A good rule of thumb is to have a minimum of 6-months living expenses in savings for any unforeseen situations that could arise.
How much credit card debt do you have and what percentage is it of your income? Can you manage this debt and pay for a home plus all of the expenses associated with home ownership?

Taking inventory of your current financial picture and evaluating your ability to add new expenses into your budget will help you understand how prepared you are to take the next step in the process.

Do you have enough for a down payment?

Another element of being financially prepared to purchase a home is whether or not you have a down payment.

Down payments affect both the balance of your loan and the amount you will pay per month. These days there are programs that do not require the standard down payment of 20% but will require holding mortgage insurance which is an added cost to consider. Most programs will require a minimum of 5%. However some programs, such as a VA loan or USDA loan, allow you to purchase a home with 0%. (Be aware, however, that even with 0% down payment options, there are still closing costs you will need to pay to obtain the loan.)

Related: Sente Mortgage Calculators

You also need to be aware that the source of the down payment can be an issue for some loan programs. Some allow a gift for a down payment, but others do not. And some programs will require you to document the source of your down payment.

Did you know?

When it comes to home ownership, there are a lot of different loan programs available and it’s important to know that you don't necessarily need to have a 20% downpayment. In fact, some potential homeowners may quality for as little at 0 or 3% down. However there are plenty of expenses that come with homeownership, and having savings available for not only a downpayment but to help with those unexpected expenses are important to consider when making a decision.

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Are you ready to settle down?

In addition to general financial readiness and a down payment, another consideration that is often overlooked is the unforeseen expenses and responsibility associated with owning a home.

For many people, renting feels like throwing money away. In some aspects this is true but might not be the full picture. Renting offers a great deal of freedom that you may not realize. While tapping into your handy DIY side can be fulfilling, and a yard can be the setting for enjoyable events, a house can also require sacrifices that need to be considered during the decision making process. Here are some questions to consider when thinking about home maintenance:

How much time do you have for repairs, yard work and ongoing maintenance? Or do you have someone you can pay to do this for you? If so, is it in your budget?
Have you calculated property taxes, homeowner’s insurance and seasonal utility bills? If you live in Texas or the South, that first AC bill can be the first in a long list of unplanned expenses.

Once you have examined lifestyle and financial factors, determined if you have a down payment then you can begin to determine how much money you have to spend on a home.

Conclusion

So there you have it. Answer these questions and you’ll be on your way to making the process of buying a first home that much easier. To get started on the process, call you local Sente mortgage banker.

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