1
Will you even qualify for a mortgage?
Unless you have enough money in the bank to buy a house
with cash, you'll need a mortgage. Before you get too deep in
daydreaming about your new home, reach out to a lender to see if you
qualify for a loan. They can also tell you how much of a mortgage you
qualify for, which is determined in part by your debt-to-income ratio.
Job stability, credit history, and savings are some of the important
factors used when qualifying for a mortgage.
If you qualify for a mortgage, buying a home might be a good next
step. If not, you should first spend some time shoring up your finances.
Qualifying for financing is a critical part of the home-buying journey.
So if you have challenges in this realm, renting may be a good
alternative for now.
2
Can you afford the closing costs?
So you've saved up enough for a
down payment—congratulations! But
beware: If you want to buy, there are more
upfront costs involved.
Closing costs should be factored into your
financial planning and reality check. These
costs are used to pay for items such as
appraisals, inspections, and much more
and can amount to up to 3% or more of
the final purchase price.
When you're buying a home with a six-
figure price tag, 3% or more can mean
many thousands of dollars that you'll need
to pay upfront, in addition to your down
payment.
3
Can you afford the neighborhood?
Some costs—such as the down
payment, closing costs, home
inspection and appraisal—are just the price
of admission to homeownership. But other
real estate expenses depend entirely on
where you choose to buy.
You'll want to consider the overall cost of
homeownership, this includes the price of
insurance and property taxes, which will
vary based on community and location.
You can check with your local tax office
or assessor to confirm the property taxes
in your area and calculate what you can
expect to pay based on a home's assessed
value. Keep in mind that property taxes vary
widely by state and city.
