Financial Considerations When Buying a Home

When you are preparing to buy a new home, you will want to carefully examine your financial situation to make sure that buying a home is the responsible thing for you and your family to do at a particular moment in time. Not only will you need to conduct a thorough examination of your finances, but you should anticipate that a bank, or other lending agency, will also look at your finances in detail before agreeing to approve you for a mortgage.

Below are a few key elements that should be examined by the bank (or other lending agency) as well as the homeowner before purchasing a new home.

Considerations for the Bank

There are three main things that a bank will look for in a potential borrower. These items are

·         The individual's current salary and projected future income. The bank will want to make sure that the person borrowing money will be making enough in their career to conceivably pay back the loan in the time frame agreed upon.

·         The person's financial / credit history. Banks are looking for responsible and trustworthy borrowers, and will want to make sure that an individual does not have a history of outstanding debt.

·         Collateral. In most cases, the bank will use the new home being purchased as collateral for the loan.

Considerations for the Buyer

For individuals looking to purchase a home, the following questions will be extremely important to consider.

·         How long are you planning on living in the home? In addition to the cost of the house itself, there are a number of additional fees and expenses that come along with purchasing a home. If you are only planning to live in the home for a few years, it may not be a wise move to purchase a house.

·         What are you comfortable borrowing? Just because a bank offers you a certain amount of money does not mean you have to accept it all. It is important to remember that you will have to pay back all of the money you borrow plus interest, and so you should be careful to borrow only what you really and truly need.

·         Could renting be a better option? While owning a home can bring additional tax benefits, for some people in certain situations, renting is a far more responsible financial option. 

If you would like more information on purchasing a home, contact the carvajalgroup.com Austin-based real estate agents of the Carvajal Group today.

Joseph Devine