Friday, October 28, 2022 / by Amy Brown
It's a tough question. So I have compiled a self checklist to help evaluate your financial situation and estimation of your future projections so that you can make the choice that works best for you.
Sure interest rates are a factor but what else should you consider?
1. What are your short and long term family goals? For instance, are you thinking of expanding your family?
2. Are you currently able to put some money into savings? No more than 50% of your income should go to housing and the optimal percentage is 35%. Take a hard look at your expenses and make sure that you are able to put some money away for emergencies and unexpected costs.
3. Would you have to exhaust your savings in order to make your down payment? Even after the purchase there are always unexpected costs. Make sure that you are not spending all of your savings on a down payment.
4. Are you able to afford the maintenance and expenses that go with home ownership? Things like roof repairs, HVAC repairs, gutter cleaning, lawn maintenance, etc.
5. If you had a catastrophic change in income, would you still be able to afford your mortgage? Layoffs happen and that should be a part of your contingency plan.
6. Are you able to afford your moving costs? Moving is very expensive even if you enlist your friends and decide to do it yourself. There will be utilities to hook up, furniture that you will need to buy, and the cost of things needed to set up a home.
Over the past 40 years, the median rent price has risen by 140% while median income has only increased by 35%. Although prices are starting to decline slightly, we are still at near record values. Keep in mind that the premium that you pay for rent is temporary while a mortgage payment is a long-term commitment. Make sure that you discuss your current financial situation and future goals with your lender or financial advisor so that you go into the home buying process with confidence.