This post is contributed by our friends at PlumFund, a free online crowd-funding resource for life events.
Choosing the Right Time to Buy a Home as Newlyweds
Are you about to get married to the love of your life? Or are you a newlywed that just tied the knot with your significant other? Getting your marriage off to a great financial start will set the tone for a beautiful, lifelong relationship.
Buying a home is going to be the biggest investment you make as a married couple. More than likely, from everything that you’ve heard up until this point, you’re under the impression that the best thing to do is to buy a house now instead of renting.
Many people feel that renting a house or apartment is like throwing away good money. For some of us – depending on our financial situation – this might be the only viable option.
Before you immediately jump on the home-buyer bandwagon, we ask that you consider two important questions before buying your first home. As soon as you get back from your honeymoon, that is!
Are You Financially Ready to Own a Home?
First and foremost, as a young, newly married couple, you might not be financially ready to buy a home. It’s time to take a close look at your financial picture to determine if buying a home is the best option for you at this point in your lives.
To begin with, many people believe that they need to determine if they meet the bare minimum requirements to qualify for a mortgage. While this is certainly a factor, you have to consider the other side of the equation.
Mortgage brokers have a tendency to approve newlyweds for loans that are much bigger than they should actually take on. Sadly, this is still happening even though we just went through the housing crisis that came crashing down in 2008.
Instead of finding out if you meet the bare minimum requirements; you should take some time to set financial goals that will make your first home purchase a fruitful and enjoyable experience.
The financial goals that you should consider meeting before buying your first home include:
- Building up your credit score – in order to get the best mortgage and desirable interest rates, you’ll need to have a credit score of 750 or higher. The other alternative is to have no credit score since you don’t borrow money. This will give you an opportunity to get a manually underwritten mortgage.
- Saving for a down payment – in a perfect world, you’ll need to have an available 5% to 10% of the purchase price for the down payment. No real estate agent in their right mind would consider selling to you – and no mortgage company would consider lending to you – if you do not have enough money to cover the down payment. If you’re struggling to save enough to put a down payment on your future home, consider personal fundraising as a viable option to raise the money needed to put down on your future home.
- Create an emergency fund – emergencies happen all the time. People get sick and can no longer work. People get hurt on the job and disability doesn’t cover all their expenses. Create an emergency fund that has 3 to 6 months’ worth of available funds to help keep you afloat in the event that the worst were to happen.
Do You Want to Spend the Rest of Your Life in This House?
Lastly, you need to be absolutely certain that the home you plan to buy is the home that you want to live in for the next 30 years. Sure, you could sell your home at some point in the future. But it’s not worth it to go through the hassle if you feel you might want to move out because you don’t like the home, the neighborhood, the school system, etc.
If the home you are looking to purchase is a “starter” home that you would like to see turned into an investment property down the road, take that time-frame into your budget considerations. Purchasing an “investment” or “starter” home that is at the top of your budget could create hardships down the road when you are ready to sell or upgrade.
Do you meet the financial criteria for home-ownership? Please use these guidelines to determine if you are ready to buy a home as newlyweds.