Whether you’re a first-time homebuyer or a seasoned real estate investor, buying a home is an exciting process. However, there’s a lot to consider when you decide to buy. Before you begin your search for the perfect property, here are three questions you should ask yourself:
What do I want?
Take the time to figure out what type of property you want to buy. From single-family and multi-family homes to condos and vacation homes, there are many different options on the market and it’s important to choose the type that best fits your needs. Figuring out the town or neighborhood you want to live in is equally important. While a property might have all of the amenities you’re looking for, factors like crime rate and proximity to highways can impact the overall home-owning experience. A good idea is to list out and prioritize your needs (e.g. large backyard, great school system) before you begin your search.
What can I afford?
The rule of thumb is that you should never spend more than 28% of your gross (i.e., Before tax) monthly income to go toward your housing expenses, including your mortgage payment. An alternate rule states that once you add in monthly payments on other debt, the total shouldn’t exceed 36% of your gross income. For a more tailored look at what you can afford, use our mortgage calculator to see what your monthly mortgage payments would be if you bought a home today.
Am I financially prepared?
A few months before you start searching for a home, review your credit history and make sure it is in good standing. Get copies of your credit report, ensure that it’s accurate, and fix any issues you discover. It’s likely that you’ll also want to get pre-approved for a home loan, which will put you in a better position to make a serious offer once you find the right property. Pre-approval from a lender is based on your credit history, debt, and income.