Moving into your own place can be exciting and frightening at the same time. At Patterson State Bank, we suggest considering the following questions when choosing your new home.
1. How much money do you have saved for a down payment?
Start with an evaluation of your financial health. Figure out how much money you have for a down payment, which is typically 5 to 20 percent of the price of the home. Be sure to keep enough in savings for an emergency. It’s a good idea to have three to six months of living expenses to cover unexpected costs.
2. How much debt do you have?
Consider all of your current and expected financial obligations like your car payment, credit card debt, and student loans. Make sure you’ll be able to cover your payments in addition to the cost of your new home. Try to keep your total mortgage payment (including escrows) plus utilities to less than 25% to 30% of your gross monthly income. Regulations limit your allowed debt to income (DTI) ratios, which vary from product to product.
3. What’s your credit score?
A high credit score indicates strong creditworthiness. Prospective homebuyers can expect to have their credit history examined. A low score can keep you from qualifying for the home you want and also from a low interest rate on your mortgage loan. If your credit score is low, you may want to delay moving into a new home and take steps to raise your score.
4. Have you factored in all the costs?
Create a hypothetical budget for your new home. Factor in real estate taxes, mortgage insurance (if applicable), and possible homeowner association (HOA) fees. Find the average cost of utilities in your area. Evaluate the price of gas, electricity, water and cable. Estimate the cost of yard maintenance and other basic maintenance costs such as replacing the air filter every three months.
5. How long do you plan to own your home?
Over time you can build equity in your home or even use it as a financial resource if you need to borrow money. Carefully consider your current life and work situation. Think about how long you want to stay in your new home. Generally speaking, the longer you plan to live somewhere, the more it makes sense to invest in a home.
Call us for your free Mortgage Loan Review and free no-obligation Pre-qualification application. We have mortgage lenders in our Bank locations as well as our Loan Production Offices in Lafayette, Metairie and Mandeville ready to help you!