Home buying is a major financial step. From saving enough money for a down-payment to qualifying for a mortgage to finding a home that meets your needs (and your budget), there are several crucial steps that must be completed before signing on the dotted line.
Take Our Quiz: How Smart of a Home Buyer Are You?
Perhaps one of the most important steps is assessing how much home you can actually afford to buy. Before you start looking at houses, review your financial situation to determine what you can pay down and how large a monthly load you can carry. You'll need this information when it's time to sit down with your lender anyway.
If you don't have a net-worth statement already, it's time to put one together. That inventory of your assets and liabilities will help you determine the maximum down payment you can make. If money you will need is tied up in illiquid assets, such as your current home, land or collectibles, you must allow yourself plenty of time either to sell or to borrow against them.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
From your total liquid net worth, subtract:
1. Savings for emergencies, educational expenses, or retirement
2. Settlement and moving costs
3. Cash you'll need to improve, decorate and furnish your new home
The bottom line will be the sum that you could put down on the new house, if you wished to use it all. The more cash you pay up front, the less you will have to pay month by month on the mortgage, and the lower your total interest costs will be.
Conversely, the less you put down, the greater will be your leverage, tax deductions for mortgage interest, and available funds for other expenses, including decorating and furnishing. Also keep in mind that the money you hold back from your down payment, if invested wisely, might earn you more than the appreciation on your property will add to your equity.
You'll also want to look at your spending habits to figure out how the new house payment will figure into your budget. If you don't have a budget already, use our household budgeting tool to help track your spending.
-
Commercial Real Estate Outlook 2024: The Kiplinger LetterThe Kiplinger Letter In 2024, expect hybrid and work-from-home trends, tighter budgets, rising rents and the demand for data centers to continue.
-
Delinquent CRE Loans Are on the Rise: The Kiplinger LetterThe Kiplinger Letter Banks are expanding their efforts to restructure CRE loans to avoid losses from the commercial real estate sector.
-
As Mortgage Rates Rise, Renting Is Now Cheaper Than Buying for Many: The Kiplinger Letter
The Kiplinger Letter A jump in mortgage rates has caused housing affordability to slump and priced many first-time home buyers out of the market.
-
Rental Market Will Slow Through 2023: The Kiplinger LetterThe Kiplinger Letter Expected growth in the rental market is likely to remain slow for the rest of the year amid a slow housing market and cooling economy.
-
Selling Your Home? Set the Right Pricereal estate If you're selling your home, setting the right price is crucial. Don't overprice or you'll scare away prospective buyers.
-
WFH Impact on Commercial Real Estate Market: Kiplinger Economic ForecastsEconomic Forecasts Commercial real estate continues to struggle. Office vacancies hit 18.9% in the second quarter of 2023.
-
Greenland, U.S. Plans to Boost Tourist Economy: Kiplinger Economic ForecastsEconomic Forecasts A U.S. congressional effort could see some Canadian visitors get longer stays, meanwhile, Greenland bids to be the next vacation hotspot.
-
China’s Economy Weakened by Low House Prices and Falling Exports: Kiplinger Economic ForecastsEconomic Forecasts China’s economy lost momentum in May due in part to fewer exports and declining housing prices, but the country’s fast fashion retailers are booming.
