You heard about financial planners helping clients balance their portfolio and plan for retirement. What you should know is that they can also help you buy a home. This is not a surprise because after all, buying a house is the biggest financial investment you will ever make.
If you are planning to buy your first home, it is time to bring in the big guns. You need more than a real estate agent to determine which is the right fit for you. Having a financial planner will give you strong opinions and recommendations on just how to go about it. To get started, here are some financial advice samples that you can consider:
Determine the right time to buy
According to experts, the idea of having your own house is quite appealing but you have to determine the right time to buy. To help you determine the right time to buy, you need to make a list of the advantages you will gain from buying a house versus the downsides. Next, evaluate your family’s income over the next five to ten years.
You need to look at where you stand financially. Ideally, you should have at least 3-6 months’ worth of living expenses for emergencies and you already started your retirement nest egg. It is important that you have little or no credit card debts and you made progress in decreasing your student loans.
Only buy if you plan to stick around
Most financial planners recommend that you only buy a house if you plan to stick around. You have to be familiar with break-even point. This is how long it will take for you to recover closing costs (fees that are paid to third parties, which helped facilitate the sale). Typically, you should own the home for at least three years to recover the initial costs of buying the house.
Think about the full costs of homeownership
Sometimes renting makes more sense than buying a house especially if you tend to pay more. When you are buying, you should factor in the full costs of ownership from the property taxes to interest, home insurance, utilities, and other expenses.
Try to make 20% down payment
Unless you qualify for FHA (Federal Housing Administration) loan, you need to obtain a loan from conventional private lenders (like banks and credit unions). If you can, try to make 20% down payment. Keep in mind that if you put less, you will pay private mortgage insurance and an additional monthly fee.
Avoid looting your retirement funds
It is tempting to borrow from your IRA (Individual Retirement Account) to accumulate down payment in a home but it is not a wise decision. Your IRA should not be touched.
Buy a house you can afford
Unfortunately, many homeowners commit the mistake of buying a house that they cannot afford. It is important that you do not stretch yourself that your housing expenses are going to stress you every month. The best way is to look for a house that you can comfortably afford so you can start with retirement plans as early as possible.