Buying a home is one of the biggest financial moves you'll ever make.
Beyond the excitement of finding the perfect property, it's essential to understand the financial implications and ensure that you're making a sound investment. This guide highlights key financial factors to keep in mind throughout the home buying process.
Determine Your Budget & Assess Affordability
- Assess your financial situation, including income, savings, and existing debts, to determine how much you can afford to spend on a home. RightCapital is a great tool to use to assess your current cash flow, and determine how potential mortgage costs will impact your overall finances.
- Make sure you're considering not only the purchase price but also ongoing expenses like HOA fees, property taxes, insurance, and utilities.
- Understand the costs to maintain the home once you own it, the impact that owning a home will have should one spouse need/want to stop working to raise children, as well as how long you intend to live in the home.
Assess Affordability and Financing
- Avoid overextending yourself financially by selecting a home that fits within your budget and allows room for unexpected expenses or changes in circumstances.
- Consider potential future expenses, such as home renovations, repairs, and lifestyle changes.
- Assess your debt ratios, qualification for advantageous mortgage terms and/or special lending programs (e.g., VA loans), and the loan application process.
- Make sure to save for a sufficient down payment, typically ranging from 3% to 20% of the purchase price, depending on the type of mortgage and lender requirements.
Understand Tax Implications
- Familiarize yourself with the tax benefits of homeownership, such as mortgage interest deductions, property tax deductions, and potential capital gains exclusions.
- Consult with a tax advisor to understand how homeownership will affect your tax situation and maximize available deductions and credits.
- Keep records of all relevant tax documents and expenses related to homeownership for accurate tax reporting and compliance.
Plan for Future Financial Goals
- Consider how homeownership fits into your broader financial plan and long-term goals, such as retirement savings, education funding, and wealth accumulation.
- Balance your housing expenses with other financial priorities to ensure that you're maintaining a diversified and sustainable financial portfolio.
- Review your financial plan regularly with your dedicated advisor and make adjustments as needed to accommodate changing circumstances and priorities.
Home Buying Checklist
Download our checklist below and use it to ensure you are prepared for your home buying journey!