How to Know if You Are Ready to Buy a Frisco Home

How to Know if You Are Ready to Buy a Frisco HomeIf you are renting a home in the Frisco area and your rent is rising or you are just tired of paying money into someone else's investment benefits, it can feel like renting is a waste of your hard-earned money. However purchasing a home in Frisco is the largest purchase most people will make in their lifetime, and it takes a large level of commitment. 

There are many factors to consider before buying a home beyond being able to make the mortgage payment. There is much more to homeownership and truly affording a home than qualifying for a mortgage and purchasing one. Here are some factors to consider about your finances from financial advisor Dave Ramsey to consider before becoming a homeowner in Frisco. 

There's plenty of money in your savings and you have no other obligations

Before spending a considerable amount on purchasing a home you want to ensure that your finances are in a solid and healthy spot. This will help to ensure that you can afford your home even in the event of an unexpected emergency. Ramsey advises that potential homebuyers should pay off all other outstanding debts and have accumulated enough savings to cover anywhere from 3 to 6 months of all monthly living expenses. He notes that paying down debts will enable you to make a better down payment on a home purchase that will set you up for a better mortgage plan.

You can make a significant down payment

While Ramsey believes the best way to purchase a home is in a full cash payment if you aren't able to do so, as a majority of Frisco homebuyers are not, he suggests making a larger down payment. He has advised that you search for a 15-year mortgage to avoid paying as much interest as possible. The most common down payment made by homebuyers across the country is around 3.5% but this is an extra couple of hundred dollars to your mortgage payments with a lender requirement of carrying mortgage insurance. 

It is always best according to Ramsey to pay off a smaller loan and to be able to secure a lower interest rate. The larger your down payment the less you will be paying in fees and interest over the life of the loan.

Homeowners should be able to comfortably make payments and pay for maintenance

Often when someone considers purchasing a home they only think about the cost of the fees associated with approval of a mortgage loan and the required monthly payments over the life of the loan. Many homeowners forget about the other costs of owning a home such as maintenance, utilities, taxes, etc.

Ramsey suggests that you budget your monthly house payment to be no more than 25% of your take-home income. This allows for room to put aside money into a maintenance savings account to help you pay for the everyday costs of keeping your home in its best condition. If you are unable to make your payments and have a comfortable amount of money for the other costs of homeownership and other costs of living you may consider putting off your purchase just a little while longer until you increase your income.

Do you have plans to stay in the house for several years?

Homeownership is not a get-rich-quick investment. Seeing a return on your investment when purchasing a home is more of a slow and steady wins the race type of thing. The longer you stay in the home the more you benefit from your investment as your home grows in value. The more equity you have in a home the more you are building wealth. Equity is the difference between the money you owe on your home and the fair market value of your home. Essentially it is the amount of profit you could make on your home if you were to sell it. On average it takes about five years for a home to grow in value beyond the full cost of your purchase with a mortgage. This means that in about five years if you were to sell your home you would not lose money. 

If you are unable to move into a home and settle in for at least five years then it is better to continue renting until you can settle in for a longer period.

You have found a trustworthy agent

Hiring a real estate agent is more than just finding someone who knows what is going on in the Frisco real estate market. You want to hire someone you know you can trust that you can communicate your personal homebuying goals to and they will help you to find a home that you can truly afford. You don't want to work with an agent who is so focused on making a commission that they blur the lines of keeping your home purchase price at a comfortable affordable level for you.

If you are considering purchasing a home in Frisco I am here to help. I always put the best interest of my clients first and I'm here to help you find a home you can comfortably afford. Contact me anytime with any Frisco real estate needs.

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