Moving into your own place can be exciting and frightening at the same time. The American Bankers Association suggests considering the following questions when choosing your own home.
Start with an evaluation of your financial health. Figure out how much money you have for a down payment or deposit on a rental. Down payments are typically 5 to 20 percent of the price of the home. Security deposits on rentals are usually about one month of rent and more if you have a pet. But be sure to keep enough in savings for an emergency fund. It’s a good idea to have three to six months of living expenses to cover unexpected costs.
Consider all of your current and expected financial obligations like your car payment and insurance, credit card debt and student loans. Make sure you will be able to make all the payments in addition to the cost of your new home. Aim to keep total rent or mortgage payments plus utilities to fewer than 25 to 30 percent of your gross monthly income. Regulatory changes due to take effect next year will limit debt to income on most loans to 43 percent.
A high credit score indicates strong creditworthiness. Both renters and homebuyers can expect to have their credit history examined. A low credit score can keep you from qualifying for the rental you want or a low interest rate on your mortgage loan. If your credit score is low, you may want to delay moving into a new home and take steps to raise your score. For tips on improving your credit score, visit aba.com/housingmonth.
Find the average cost of utilities in your area, factor in gas, electricity, water and cable. Find out
if you will have to pay for parking or trash pickup. Consider the cost of yard maintenance and
other basic maintenance costs like replacing the air filter every three months. If you are planning
to buy a home factor in real estate taxes, mortgage insurance and possibly a home owner
association fee. Renters should consider the cost of rental insurance.
Generally, the longer you plan to live someplace, the more it makes sense to buy. Over time, you can build equity in your home. On the other hand, renters have greater flexibility to move and fewer maintenance costs. Carefully consider your current life and work situation and think about how long you want to stay in your new home.
Whether you’re a renter or a homeowner, chances are you care about protecting the environment – and saving money. Here are some tips from the American Bankers Association to help you do both.
4800 Mills Civic Parkway
West Des Moines, IA 50265
102 S. Main, PO Box 67
Baxter, IA 50028