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Buying a New Home: How to Know If You’re Financially Ready
What do you get when you buy a house and you don’t have enough money in your bank account to sustain your living from there? A disaster!
There may be a lot of reasons why you would want to buy a new home – you may be starting a family, or you just want to start investing. Whatever the reasons are, the success of whether or not you’d be able to maintain your new home depends largely on your financial capacity, security, and flexibility.
These factors are what you should consider to determine if you are financially ready to own a new home:
Your Current Financial Situation vs Your Assumed Financial Situation
Buying a home is a huge responsibility as much as it is a huge investment. You should first figure out how you are doing financially by calculating your monthly income minus your monthly expenses. This way, you’ll get a bird’s eye view of how well you are doing financially and how much you can allot for your new home.
In doing so, you should also take note of the expenses related to keeping a home. Examples are heating and ventilation, home maintenance, mortgage taxes, and many more.
The rule of thumb here is to not exceed 32 percent of your gross monthly income when it comes to your expenses.
Keep Your Expenses in Check
The total of your monthly debts shouldn’t amount to more than 40 percent of your gross monthly income. You should be able to manage your credit card payments, housing costs, and car loans with no problem.
If you’ve assessed your current financial situation and your monthly expenses to be fairly manageable even with the added costs of a new home, then you’re financially ready to own a new home. However, if at some point you find yourself not meeting monthly payments, this might make it difficult for you to even be approved for mortgage. However, there are still some things you can do to improve your financial situation.
- First, pay off some loans you currently have. Getting some loans out of the way can help you save up for a bigger down payment.
- Next, assess your household’s current budget and take a look at the expenses. Pick out a few areas where you can manage to spend less on, such as snacks and other luxuries. Note that you don’t have to go all out with appliances and other amenities since most people don’t start out getting their dream home too soon.
- Lastly, you can try setting an appointment to meet with a financial adviser. These guys are trained to help you remodel your spending habits to allow you to get to your savings target easily in the smallest amount of time possible.
Buying a new home is exciting, but you should still be realistic and take note of the factors listed above to know whether or not you are financially prepared to become a new home owner. Keep in mind that getting a new home would be much more convenient without a mountain of debts following you around.
