A growing family is an exciting time, but one that poses many big challenges. Creating a beautiful, warm, and nurturing home for your children is a top priority. Finding the right home that fits your needs is essential.
Buying a home requires a lot of foresight. You are choosing a place that you plan to stay for a long time. You want to make sure that your choose the right neighborhood, one that has good schools, safe surroundings, and the proper amenities. Just as important, you want to find a home that will provide the right environment for your children's growth.
One big question many new parents face is how big of a house to buy. If it is a first home, you have to decide how big a home you should buy. Does it make sense to buy a larger home than you need right now, or should you buy a bigger house that your family can grow into? If you already have a home, but your family is growing, you need to decide when you should trade-up?
The best way to answer to those questions is to find a house that fits your budget and financial capabilities. Parenting involves responsibility. Don’t buy a home and commit to a mortgage that you can’t easily manage. A bigger family means growing expenses, including schooling, medical costs, and saving for the college.
Here are three tips to help you find a house and mortgage that fits your family:
The first fit: Set Your Limits
Before you start shopping for a home and an affordable mortgage, make sure that your budget is in order. Chart out your expenses and set your limits. Calculate for the expenses you expect to increase, including medical insurance, childcare, education, and general household expenses. Ideally, you mortgage payments, property tax, and homeowners insurance should not be more than 25% of your gross monthly income.
Setting priorities and watching your budget will help you know exactly how much of your income you can devote to your mortgage payment.
The second fit: Trim your debt
Carrying a lot of debt isn’t healthy for you or your family and it affects the kind of home you can buy. If your credit cards have running balances, work hard to avoid making only minimum payments. Not only does it cost you a lot in interest charges, but it harms your credit score. Damage to your score can make your mortgage interest rate higher or even keep you from qualifying.
If you are using your credit card to cover your current monthly expenses, then make a plan to reverse that cycle. If you can’t pay off your debt on your own, look at different debt relief options out there. Remember, the more debt you have, the smaller the mortgage you can qualify for, and the less expensive home you can afford.
Trimming your debt will help your family fit into an even nicer home.
The third fit: Save even more
Saving is an important step toward buying a home. You need to save in order to build up a down payment. If you haven’t saved for long, or accumulated a significant amount, then look into a low down payment loans.
Check out an FHA loan that requires only a 3.5% down payment or conventional loan options that allow you to buy a home with only 5% down. Both of these options require mortgage insurance, which will reduce your purchasing power. If you’re able to build up enough savings to make a down payment of 20% of the home’s value, then you can cut out the costs for mortgage insurance and save even more.
Building strong savings habits has an additional benefit, too. It makes you more disciplined to take on all the other financial responsibilities that come with a growing family.
Buying a home that fits your family takes preparation. But, as parents, you know all about that. Careful preparation will help you find the home that fits your family.
- Start by establishing realistic limits. Don't buy the most expensive house you qualify to purchase.
- Pay off debt. Lower debt improves your DTI and ability to qualify for a home loan.
- Build your savings. Reduce your monthly mortgage costs by making a large down-payment, and smooth the process by having the necessary cash reserves on hand.