Purchasing a home is quite possibly the largest purchase you will make in your lifetime. Like most people, when deciding to purchase a new home, it's easy to spend countless hours searching the internet, falling in love with home after home, watching video tour after video tour, imagining how to decorate each room. Many also look for online mortgage calculators to estimate a future payment, confidently comparing numbers. While these things can begin to point a potential homeowner in the right direction, there is much more to consider when starting the process. Ask yourself the following questions:
The first place to start determining if you are ready to purchase a home is to determine your budget. The mortgage banker you choose will use your gross monthly income (the income you receive prior to deductions such as taxes, medical insurance, 401K) to determine how much you qualify for. However, since we live on our net income (income you received post taxes, insurance, retirement…) it’s important to create a budget for yourself by first outlining the amount of money you spend on all of your liabilities such as car payments, credit card bills, student loans. You also need to calculate how much money you spend on groceries, eating out, leisure activities, gas, car maintenance etc.. Make sure you build in a buffer to account for home maintenance and utilities.
Keep in mind, many online mortgage calculators do not include property taxes and homeowner’s insurance. These items are integral parts of your monthly payment. Click here for a great calculator to help you determine whether buying or renting is right for you.
What is your 5 year, 15 year and 20 year plan? Do you plan to have children while living in this home? Evaluating your long term goals will help you make an educated decision on the type of house your want to purchase.
At this point in the home buying process, you may realize that you have a lengthy list of questions that need answering. Who do I call? Who can I trust? Who can help me through this process? Your next phone call should be to a qualified, educated and experienced mortgage banker. The right mortgage banker can help you identify your goals and create a plan to reach them.
Most of us think of our mortgage as simply the largest debt we carry. Your mortgage banker will be able to show you ways to utilize your mortgage to save for retirement, and pay for college, but most importantly, your mortgage banker should be an individual that you create a lifetime relationship with.