The biggest purchase majority of people tend to make in their life time is their home. Moreover, it’s also the most lasting purchase most people are likely to make. Keeping that in mind, it is imperative that you purchase a home that brings along lots of joy to you, not grief and woes.
It is unfortunate that there are many people who widen their finances beyond the breaking point. Buying a home that you simply cannot afford means can lead to financial strain, a dwindled quality of life and even family conflicts. By strictly following these basic rules of thumb, you can make certain that you don’t bite off more than you can chew when buying a new home.
1. TRY TO THWART PMI
The first and the most important rule when purchasing a house is to make certain that you have sufficient amount of funds saved to make a down payment; as per the general standard, 20% should be adequate. Typically, a 20% down payment permits a borrower with reasonable credit to make the grade for the best mortgage interest rates and at the same time avoiding private mortgage insurance (PMI).
Generally, PMI is mandatory for some mortgages when a creditor is fearful you might fail to pay. In quintessence, PMI is a creditor’s insurance policy that the borrower pays for. It’s just like you get nothing from it, and yet it costs you so much more. So, assuming you’ve got a good credit, a 20% down payment lets you forgo paying a monthly PMI.
2. CONTROL YOUR PITI
The second rule that you must abide is that your PITI (mortgage principal, interest, property taxes and homeowner’s insurance) should be about 1/4thof your overall living expenditures. For instance, if your accumulated expenses per month are $4,000, then your PITI should be $1,000. (And, obviously, your expenditures should be covered by your earnings, after you haveset aside the money for retirement savings, emergency funds and other safety measures.)
Generally, mortgage lenders utilize a 28% rule when taking your application into consideration; according to which,not more than 28% of your total income should be allocated for housing. Allocating 1/4thof your total expenses toward PITI should give suretythat you’re in a good condition.
3. DON’T SKIP ON THE MAINTENANCE COSTS
It’s wise to allocate just about 1% of your house’s total outlay for yearly preservation and maintenance. It is important to note that this is only the cost of taking care of the house and grounds; exclusive of upgrades or intended repairs. For a house worth $300,000, the maintenance expenses should be around $3,000 a year, or $250 a month. Even though that might seem like putting aside a lot of money, you’ll be glad it’s there when you have to fix your AC units or simply a hole in your roof.
At FortBendConnect.com, first time home buyers will be provided with a comprehensive array of information regarding buying and selling homes in Fort Bend County while getting into contact with some of the most experienced real estate brokers. Learn more about us or browse some recent property listings here.