Buying a home is likely to be the biggest purchase you will ever make, and deciding how much you can afford to spend is likely to be one of the biggest decisions. Planning wisely can help you enjoy the perks of homeownership instead of facing a disaster with your loans. Consider these tips before you sign a mortgage agreement to ensure you’re making a smart financial decision when you buy your home.
Calculate Your Debt-to-Income Ratio
Your debt-to-income ratio is the amount of money you spend on debt each month versus your expenses. You can calculate your ratio, also called a DTI, easily by dividing your fixed monthly expenses by your gross monthly income. Including an estimated mortgage payment, your DTI should be no more than 30%. If it is higher, then you could be at risk of defaulting on your loan or living house poor, with little money left over to enjoy your life after you make a mortgage payment.
Consider All the Costs
Many people make the mistake of looking only at their mortgage payment when they are considering buying a home. There are in fact many other costs to consider. During the initial purchase, in addition to a down payment, there are closing costs, realtor fees, and other expenses. Throughout the time you own the home, you will need to pay for homeowner’s insurance, title insurance, HOA fees, repair costs, landscaping, and more. Be sure you can afford all of the costs of homeownership before investing.
Focus on a Down Payment
Making a down payment of 20% or more may not only be required by your mortgage lender but can also save you a considerable amount of money in the long run. When you can’t pay at least 20% down, your lender will likely require you to purchase mortgage insurance, which can be costly. Buying a home with a down payment you can afford is a good financial strategy.
With Core, you can feel confident that the home you’re purchasing has a clear title and that you’re protected if a problem does occur. Contact us for your title orders today and learn more about our insurance protection by calling:
(856) 316-4005 for any of our NJ offices
(267) 428-3821 for our Philadelphia, PA office
(954) 434-1445 for our Ft. Lauderdale, FL office
(239) 970-4200 for our Naples, FL office
(734) 823-3356 for our Northville, MI office