Buying a home is a big financial commitment! For many people, a house is the biggest purchase of their life. We often get asked a lot of questions surrounding the home-buying process. Here are five important financial questions to consider before making an offer on a home.
- Does buying a home align with your goals?
Everything we do at Zephyrus Financial Services starts with goal setting. We want you to dream big! We encourage you to truly think about what’s important to you and your family. Start by taking a step back and asking yourself if buying a home could impact other areas of your life. Will you still be able to put aside money for retirement? Can you still save enough for your child’s education? What would happen if you lost a source of income? If you don’t know the answers to these questions, reassess your readiness.
- How much house can I afford?
People often think the amount of money they are approved for is how much they should spend on a home. This isn’t always the case. Banks and realtors are in the business of making money. They can make more money by lending more and receive a larger commission by talking you into a bigger house. They do not know what other financial goals you have. They aren’t taking into account any plans you have to start a family, save for retirement or begin a new business venture. You need to look at your individual situation. We would never recommend taking money from your investments or 401(k). That would be like robbing your future for the bright, shiny object you can see now. At Zephyrus Financial Services, customizing financial roadmaps is our area of expertise. We can help you determine how much home you can afford while keeping you on track to reach your other financial goals and dreams.
- What are my mortgage options?
Financing a home can feel overwhelming. There are five different types of mortgages: conventional mortgages, adjustable-rate mortgages, fixed-rate mortgages, government-insured mortgages and jumbo mortgages. Which option is best for you will depend on your circumstances. If you can swing a 20% down payment, you won’t have to worry about private mortgage insurance. PMI adds additional fees to your house payment every month. Don’t worry if you don’t have a 20% down payment; there are other loan options that require only 5% or no down payment at all.
- Can I afford the tax burden?
Owning your own home does come with some tax breaks, but realize a home’s property taxes can change at any time and increase your monthly mortgage payment. Home-related tax breaks depend on your tax bracket. You’ll need to do some research to find out how much property taxes will cost you. Tax records are available at the city or county assessor’s office. These taxes are often paid through an escrow account bundled into your monthly mortgage payment. Along with property taxes, consider how much you’ll pay for homeowner’s insurance. If property taxes and insurance costs will eat up too much of your budget, you might want to wait to purchase a home.
- How do I prepare for home costs?
Being a homeowner means you’re responsible for everything from the leaking faucet to replacing appliances when they break down and other bills. We recommend setting aside an established amount every month for maintenance and repairs. If you’re not prepared with an emergency fund, the inevitable repair could lead to credit card debt, taking out a loan or borrowing money from friends and family.
Buying your dream home can be emotional. Don’t make any decisions without considering and analyzing the financial consequences. If you are not sure about your answers to these questions, now is the time to do more research or seek help from a fiduciary. Fiduciaries always have your best interest in mind. Set up a meeting with us today to create a customized financial roadmap built around your goals and dreams.
Please share this blog post and follow us on social media.