You want to buy a new home but aren’t sure if you can afford it. Use this financial checklist as a guide before you attempt to take the plunge.
Consider Your Budget
Can you afford to buy a home? All of your necessary purchases, including mortgage, utilities, groceries, car payments, insurance premiums, and gasoline should add up to no more than 50 percent of your total income, according to bankruptcy expert Elizabeth Warren.
Evaluate Your Debt
Do you have any high-interest debt, which is debt that’s above an 8 percent interest rate? If you do, then you might not be ready to purchase a home, and you should focus on paying off that high-interest debt. This is important because you’ll need to make a downpayment on your home. Also, you’ll have to cover inspection and closing costs, and some of this might come out of pocket. You’ll want to decorate and furnish your home, adding to your expenditures. And, down the road, you’ve got to be prepared for maintenance and repair costs, too.
Consider Your Emergency Savings
Ideally, you should have three to six months of your basic living expenses saved up to use for emergencies like losing your job, or your car unexpectedly breaking down. Having an emergency fund can help prevent financial disaster.
Save for Retirement
Does your job offer a 401k? If so, you should contribute at least enough to get the full employer match. If you don’t have a workplace plan, you should open an IRA, an Individual Retirement Account, and contribute at least 10 to 15 percent of your earnings. IRAs are an especially wise choice for those who are self-employed, and for those whose jobs don’t offer a benefits package.
Are You Buying a Home on Marco Island?
Considering buying a home on Marco Island? We’d love to help you find one that’s just right for your needs.
Call us at 239-821-7926 or get in touch with us online to let us know what you’re looking for. We’ll start searching right away. In the meantime, please explore our:
- Marco Island homes for sale from $100k to $200k
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- Marco Island homes for sale over $1 million