Are you and your fiancé thinking about buying a house right after your wedding? While many couples decide investing in a home together is the right move, this isn’t always the case. From a financial consideration, buying rather than renting is usually a good idea. Perhaps the market is perfect in your area, with low prices and decent tax credits available. There are a number of important factors to consider before reaching out to a real estate agent.
Here are a few things you and your soon-to-be-spouse should discuss prior to buying a home together.
Can You Afford to Purchase a Home?
Are you and your fiancé may be financially ready to purchase a home together? How do you know if it’s the right time?
Here’s what you need to know about being financial ready to buy a home:
- You and your future spouse should have a good credit score. A score of 750 or higher is best, as you’re more likely to receive lower mortgage rates. An FHA government home loan can be approved for credit scores in the low 600s.
- Have 10-20% in cash available for a down payment. Obviously, this amount will vary depending on the cost of real estate in your area. The more you can pay upfront, the lower your mortgage payment will be.
- Don’t forget to factor in principle, interest, taxes and insurance (known as PITI) when making your budget for housing expenses.
- While many buyers negotiate out of paying closing costs, it’s smart to have the funds set aside anyway.
- It’s always best to be debt-free when you buy a home. If this isn’t possible, make sure you have paid off all of your credit card debt and student loans.
- Set aside an emergency fund of four to six months of earnings. Emergency funds are important if you plan to purchase a home to cover living expenses during the hard times, expensive repairs or unexpected unemployment.
Additionally, brokers often approve people for mortgages that are higher amounts than they can reasonably afford. Even if you qualify for a higher loan amount, take time to ensure it’s really something you can afford comfortably.
A good guidelines to avoid a mortgage payment that requires more than about 30% of your gross monthly take-home pay.
Is This Really Where You Want to Live?
It’s easy to get caught up in the idea of buying a new home together. Is this really where you want to live? You and your spouse-to-be should take time to seriously reflect on this. When you purchase a home, you must both be ready to take on the long-term commitment that accompanies it. Most experts recommend planning to own a home at least five years before selling. The costs of selling a property can be significant.
While you can always sell or rent your property in the future, these issues require a level of planning, orchestration, and management you may choose to avoid.
Some factors you should keep in mind are:
- Proximity to your friends and family
- Employment prospects
- The length of your daily commute
- School zone designation
- Community features
- Parks and community centers
- YMCA or fitness centers
- Travel opportunities
Don’t rush through this decision. The two of you should spend a significant amount of time investigating each of these details before deciding to purchase a home.
Do You Both Have Secure Careers?
Employment should also be a consideration when investigating whether it’s the right time to buy a home. You will need a stable and consistent income in order to afford making regular mortgage and utility payments.
To help assess the security of your current careers, ask yourselves these questions:
- Are you happy with your job now or could you see yourself wanting to change careers in a few years?
- Could your job require you to move in the future due to expansion or a promotion opportunity?
- Is your position critically important or could it be targeted if company downsizing or a reorganization occurred?
Whether or not you both enjoy your careers should also be weighed into your decision. If one or both of you are planning to change employers or to start a new business, this needs to be considered in your decision-making process.
Every couple’s housing budget and housing requirements is different. Don’t let outside expectations and external pressures dictate the way you and your soon-to-be-spouse plan your future home together.