Buying a home with your partner is one of the most fulfilling purchases you can make. Not only are you going to experience the joy of becoming a homeowner, you’re also going to have the person you love by your side through the journey. And when you get the keys to your new home, you can settle in and start your next chapter together.
We’re not trying to put a damper on the excitement, but before you begin preparing to buy a home, it’s important for you and your partner to have an open, honest conversation in which you ask yourselves and each other these key questions:
Are we financially stable?
A home purchase brings many financial responsibilities in addition to those you already shoulder. Ideally, you and your partner should both have stable income allowing you to pay the current bills with relative ease. You should also seek to minimize any debt, which will in turn help to improve your credit score so you can get a better mortgage rate. If you’re not sure where to start, consider taking an online home buyer class.
Where do we want to live and for how long?
Where do both of you see yourselves being the happiest? It might be the neighborhood you’re in now, a city on the other side of the country or anywhere in between. It could also be a point of slight contention–and one you want to uncover early on–if one of you prefers the suburbs while the other loves the city.
When you’re a renter, you can pack up and move at the end of a lease, or sooner if you are able to sublet. Being a homeowner certainly doesn’t cement you in place forever, but it does involve a bigger commitment than renting. Even if you envision moving to a bigger home or nicer part of town after a few years, you still want to go into the purchase expecting to enjoy your first home for the foreseeable future.
What can we comfortably afford and how will we pay for it?
Don’t rely solely on a mortgage pre-approval to tell you how much you can afford to spend on a home. No one knows your finances like you and your significant other; before you seek a pre-approval, use tools such as our mortgage readiness quiz and mortgage calculator to see what you can expect to pay for a mortgage. You can also begin to search listings and get a feel for the market. As a general rule of thumb, most financial experts agree that your housing payments should not exceed 30 percent of your gross monthly income. Be sure to speak with a home buying coach to get into the details, as these are only general tips to get you started.
How much do we have to save?
Knowing what you can afford is a bridge to knowing what you have to save in order to achieve homeownership. Most people assume they need to save 20 percent for a down payment. Good news: You can put down less than 20%. In fact, the average down payment for first-time homebuyers in 2017 was 5%, and 10% for repeat buyers, according to the National Association of REALTORS®. And, it’s possible to put down even less. There are low down payment loans that make it possible to buy a home with as little as 3 percent down. Regardless of the down payment you are required to make, it will be only the beginning of the expenses you need to account for. You should also save for closing costs, moving costs, and the several months of estimated mortgage payments required by lenders.
What additional expenses are we forgetting?
There are so many expenses that catch first time home buyers by surprise, including:
- Mortgage-related fees and closing costs
- Moving costs
- Renovations, minor or major
- Ongoing maintenance
- Property insurance and real estate taxes
Once you have gone through everything, it’s time to start saving! Establish a set amount per paycheck that each of you will set aside en route to your new home.
What do we both want and need in a home?
Naturally, the two of you will value different amenities. Your partner may want a luxurious kitchen and have little interest in the living room. Meanwhile, you might be willing to sacrifice some counter space in the kitchen for a large living room that can fit that sectional couch you’ve always wanted. It can be a fun exercise to separately list out what each of you wants in your new home. Then, see how your wishes match up and boil the list down to what you need. This will help you identify deal-breakers and potential compromises.
How do we make it happen?
Made it through the list? Now it’s time for you and your partner to pursue your homeownership dream! Remember, credit.org has many resources to help you along the way. Click here to learn more.