Whether you’re planning on buying investment property or a new home, there are financial factors to consider. Knowing the details of your financial situation will help you make the best decision and help avoid unnecessary stress. If you’re trying to decide between renting and buying, here are some of the main financial things to go over:
Most financial experts advise you to save up to 6 months of emergency savings before you buy a home. Emergency savings are always a good idea to have, but when you’re considering purchasing a home, it becomes especially important. Before making a major investment, make sure you have the means to stay afloat in case something goes wrong.
It’s possible to purchase a home with a tiny down payment, but even the lower percentages are thousands of dollars. The bigger the down payment, the less money you owe to your lender. For this reason, many potential homebuyers opt for a larger down payment both to save on accrued interest and private mortgage insurance.
Most lenders will consider your debt-to-income ratio as part of your qualification for a loan. Luckily, this ratio is simple to calculate yourself. To find your own DTI, divide your monthly expenses—including loan and credit card payments—by your monthly gross income. This will give you a good idea of how you stack up compared to lender requirements.
Higher credit scores typically mean better chances of being approved for a lower interest rate on a mortgage. Your credit score comprises many financial factors. You can improve it by lowering your credit usage and paying your bills on time. While it might not seem important, even a percentage point matters for getting a good interest rate.
The financial part of home ownership can be overwhelming, but as long as you know the important metrics, you will make the best decision for your own situation. Keep these financials in mind to make the best choice.
Lana Harris is a Chicago native who is a second-generation real estate professional. She was introduced to real estate at a very young age while attending open houses with her mother who is a broker. She honed her skills assisting in property searches (back in the thick, Multiple Listing Service book days,) and using map reading skills to help plan property tour sequencing. Lana’s love of working with people and delivering strong customer service led her to the retail sector, where she developed her management skills at MC Sports, Ann Taylor, and Adidas. She and her husband moved to Utah in 2008 to enjoy the natural beauty of the mountains, and she began her real estate career here in 2015. Most recently, she was a VP of sales for a large team; she thrives on challenges and is determined to overcome obstacles to achieve results for her clients. Lana and her husband enjoy their three large dogs, skiing, camping and paddleboarding.
