Newlyweds can often feel pressured to consider buying their first home according to a certain timeline largely dictated by their loved ones' expectations. Home ownership is certainly one of the pinnacles of adulthood, but it can also be potentially disastrous to those who scale those heights too soon. Here are a few simple questions you should ask yourselves before you start contacting mortgage brokers.
Are we going anywhere?
Before you start shopping for real estate, it's important to determine how long you plan to stay in the area. If you only plan to stay somewhere for a couple of years, renting might be a much better option for you and your budget. No, you won't be building equity in a rental, but it will ultimately be less cost-intensive than buying and selling a house say, within 2-3 years' time. If your jobs feel relatively secure, and you think that your careers will keep you both in the region long-term (for at least for 5 years or more), then it might be time to seriously consider your first home purchase, assuming you meet certain financial criteria.
Are our credit scores high enough?
Depending on the mortgage laws in your state, one or both of you needs to have good credit in order to secure a home loan. If your credit score is bad or poor, you're probably not ready for home ownership. Instead, you may want to use your time and money to pay off old debts or dispute errant items on your credit report instead. Those with fair credit may be able to find a lender that is willing to work with them, but the terms of such mortgages can be less favorable for you now than they would be if you simply waited and took the time to improve your credit score.
How much have we saved?
When you purchase a home, you'll generally be expected to bring a minimum down payment to closing. Those who bring 20 percent or more may have the advantage of negotiating better terms on their mortgage loan. Depending on the terms of your sale, you might also be on the hook for closing costs. You should also be prepared to pay moving expenses, and have extra money set aside for home repairs and maintenance. If you've been renting for a long time, you may not realize how much money actually goes into maintaining a home that you own. Budget planning can be a little more nuanced for home owners than it is for renters. As a homeowner, you and your spouse will be responsible for all minor and major repairs that need to be made, so it could be in your best interest to have a professional conduct a thorough inspection on any home you're serious about buying.
What can we comfortably afford?
Note that the question was not “how big of a mortgage are we approved for?” There could be a large disparity between the max amount you're approved for and what you would actually be comfortable spending. When calculating your potential mortgage payment, don't forget to add in the costs of home insurance, property taxes, and private mortgage insurance (if applicable). Once you've decided how much you can feasibly spend on a home, take a look at what's currently on the market in your area. Is it time to start shopping, or are the current options that fall within your budget sorely lacking? You can go ahead and build the team you will need when it is time to expedite the home-buying process by obtaining quotes from a few lenders, getting pre-approved for a mortgage, and finding a highly recommended buyer's agent so that you are prepared as soon as it makes the most sense for you.