By Taylor J. Kovar, CEO/Founder – Kovar Wealth Management

 

–Hi Taylor: My husband and I are looking to buy a house, but we can’t agree on how much we have to spend. We’ve got money saved up, but we’re struggling to see the big picture and make the best choice based on what we have. Little help? — Sarah

 

–Hey Sarah: Those big decisions never come about easily, do they? I’m sure you and your husband will make the right choice, and hopefully, I’ll be able to offer a little guidance. I’ll list a few factors that you should be considering before making a bid on any property.

  1. Sufficient down payment. The last thing you want to do is dip into your emergency savings and put yourself in dire straits. Of course, a bigger down payment will reduce your financial stress going forward. Unfortunately, it isn’t always easy to know how much you can realistically pay upfront. Prospective home buyers have to fully understand the terms of their mortgage and how that payment structure will work. You also need to factor in the closing costs, inspection fees, and all the other fees that come with home buying. In short, you really need to crunch the numbers in order to get a good idea of what you can afford to pay upfront.
  2. Long or short term? How long do you plan to live in this house? If it’s forever, that makes a mortgage more sensible. If you’re buying a house because you hate paying rent, but you aren’t quite sure you want to stay in your current job or city for much longer, you should really be careful. I fully support flipping houses and buying investment properties, but that has to be your objective from the get-go; you can’t just assume you’re going to get your money back on any house you buy. Make sure you and your husband are on the same page regarding your long-term plans before signing contracts and forking over money to realtors.
  3. Upcoming expenses and current debts. You can’t prioritize buying a home overpaying other debts. For starters, that’s a surefire way to put yourself into an endless, painful spiral of debt. In addition to that mess, you probably won’t get a great rate on your mortgage if you have a lot of other financial obligations. If you’re still paying off student loans or credit cards, you better have a significant amount of money stashed away before trying to buy a new home.

Look at your situation very closely. When you have a good understanding of your immediate and future finances and goals, the house-buying process will become a lot more clear. If you have some cash saved up and a clear plan for the future, you two will be moving into a nice home in no time.