Oakland, MD – In recognition of American Housing Month, First United Bank & Trust is highlighting five questions first-time buyers should consider before purchasing a home.
“Owning a home is a great investment,” said Scott Hostetler, Vice President and Residential Lending Relationship Manager . “But before jumping into the market it is extremely important for consumers to consider the costs involved and budget accordingly to ensure they’re able to meet all of their financial obligations.”
5 Questions To Ask Before Your Home Purchase
First United encourages consumers to consider these questions before beginning their housing quest:
- How much money do you have to save?
Start with an evaluation of your financial health. Figure out how much money you have for a down payment or deposit on a rental. Down payments are typically 5 to 20 percent of the price of the home. Security deposits on rentals usually cost about one month or more if you have a pet. But be sure to keep enough in savings for an emergency fund. Having three to six months of living expenses is a good idea to cover unexpected costs. - How much debt do you have?
Consider your current and expected financial obligations like car payments, insurance, credit card debt, and student loans. Make sure you can make all the payments in addition to the cost of your new home. Aim to keep total rent, mortgage payments, and utilities to less than 25 to 30 percent of your gross monthly income. Recent regulatory changes limitthe debt to income (DTI) ratio on most loans to 43 percent. - What is your credit score?
A high credit score indicates strong creditworthiness. Both renters and homebuyers can expect to have their credit history examined. A low credit score can keep you from qualifying for the rental you want or a low interest rate on your mortgage loan. If your credit score is low, you may want to delay moving into a new home and take steps to raise your score. For tips on improving your credit score, visit aba.com/consumers. - Have you factored in all the costs?
Create a hypothetical budget for your new home. Find the average cost of utilities in your area and factor in gas, electricity, water, and cable. Find out if you will have to pay for parking or trash pickup. Consider the cost of yard maintenance and other basic maintenance costs, like replacing the air filter every three months. If you plan to buy a home, factor in real estate taxes, mortgage insurance, and possibly a home-owner association fee. Renters should consider the cost of rental insurance. - How long will you stay?
Generally, the longer you plan to live someplace, the more it makes sense to buy. Over time, you can build equity in your home. On the other hand, renters have greater flexibility when moving and fewer maintenance costs. Carefully consider your current life and work situation and how long you want to stay in your new home.
Finance Your Home Purchase Right With First United Bank & Trust
Looking to purchase a new home? Finance it correctly with a personal bank account at First United Bank & Trust. Contact our team online or find your nearest branch to set up your account today!