The Financial Checklist to Consider Before Buying a Home

Buying property is a great way to build your wealth while making a safe, healthy home for yourself and your family, and we believe that it can be an important, rewarding choice for millennials and boomers alike.

But buying a new home comes with a set of hurdles and questions – including all of the financial considerations that come with one of the biggest purchases a person can make.  

While every homebuyer’s situation is unique, there are a few financial circumstances you should be sure to look into before moving ahead with a sale.

Here are a few of the biggest financial considerations to have on your homebuying checklist:

Your Cash Flow

Buying a home is a long-term investment with a serious day-to-day impact on your pocketbook. With that in mind, it’s important to fully understand your cash flow, or the amount of money coming into and out of your accounts every month.

Before buying, take a good look at your income and expenses and start a thorough tracking system to keep tabs on all of your accounts. Knowing how much you have to spend can help you decide just how much house you can really afford.

It’s also important to keep tab on how much cash you have on hand for an emergency fund; before buying, it may be wise to bolster your cash savings in case something goes wrong with your new property.

Your Debt

Even with mortgage rates at promising lows, it will be hard to secure a loan unless you have your debts – including student loans and credit cards – under control. If you can’t get them paid off, at least be able to demonstrate that you have a clear repayment plan and that you’re able to handle your monthly bills without trouble.

Paying down your debt can also reflect positively on your credit score, which most banks will look at when you apply for a mortgage loan. In fact, it's extremely important to have a firm handle on your credit score before you begin your home search. And while it's not as important to have a "very good" credit score as you might think, it's still a good rule of thumb that the better your credit score, the better your chance of securing a lower interest rate.

Your Retirement Plans

Do you know your net worth? Is your 401(k) in solid shape, with you contributing at least as much as your employer will match? Do you have a Roth IRA?

If you answered no to most of those questions – or if the alphabet soup left you lost – you may not be financially ready to buy a home. If you’re not on track to meet your retirement goals, you may want to wait before spending so much time and money on a home purchase.

Remember, like your retirement savings, a home purchase is an investment in your future. It’s important to think long-term.

Your Costs

There are all kinds of costs associated with homeownership, and it can be a huge mistake to leave them off of your financial checklist.

In addition to the numerous closing costs, there are all kinds of fees and payments that will go into your home in addition to your mortgage, including homeowners’ insurance and property taxes, to say nothing of repairs, maintenance, renovations, and HOA or condo association dues.

Buying a home can be financially tricky, but with the right team by your side, it’s more than possible. When you’re looking for an experienced guide on the path to homeownership, drop Real Group a line! Our team is here and ready to help put you in the Chicagoland home of your dreams.

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Chicago, IL 60614

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