Whether you’re planning on buying investment property or a new home, there are financial factors to consider. Knowing the details of your financial situation will help you make the best decision and help avoid unnecessary stress. If you’re trying to decide between renting and buying, here are some of the main financial things to go over:
Savings
Most financial experts advise you to save up to 6 months of emergency savings before you buy a home. Emergency savings are always a good idea to have, but when you’re considering purchasing a home, it becomes especially important. Before making a major investment, make sure you have the means to stay afloat in case something goes wrong.
Down Payments
It’s possible to purchase a home with a tiny down payment, but even the lower percentages are thousands of dollars. The bigger the down payment, the less money you owe to your lender. For this reason, many potential homebuyers opt for a larger down payment both to save on accrued interest and private mortgage insurance.
Debt-to-Income Ratio (DTI)
Most lenders will consider your debt-to-income ratio as part of your qualification for a loan. Luckily, this ratio is simple to calculate yourself. To find your own DTI, divide your monthly expenses—including loan and credit card payments—by your monthly gross income. This will give you a good idea of how you stack up compared to lender requirements.
Credit Score
Higher credit scores typically mean better chances of being approved for a lower interest rate on a mortgage. Your credit score comprises many financial factors. You can improve it by lowering your credit usage and paying your bills on time. While it might not seem important, even a percentage point matters for getting a good interest rate.
The financial part of home ownership can be overwhelming, but as long as you know the important metrics, you will make the best decision for your own situation. Keep these financials in mind to make the best choice.
About the Author
Raena Everett
Raena has an exceptionally positive outlook on life. She believes every day presents a new and exciting adventure. She also applies this attitude towards her work. She was raised in Bangor, Maine until she moved to Venice in 2011. She graduated from the University of Maine at Orono with a bachelors degree in public management. She has been an entrepreneur her entire life, owning several small businesses in Maine. She contributes her success to her problem solving skills and her commitment to excellent customer service. These skills will easily carry over to her real estate career. Her market knowledge and customer service will provide great service to her real estate clients.
She is currently a Realtor(R) for Coldwell Banker Residential Real Estate in the Venice office.
