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Coldwell Banker Realty
Diana Plank & David Cline, Coldwell Banker RealtyPhone: (650) 619-3370
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Financial Factors to Consider When Buying a Home

by Diana Plank & David Cline 10/13/2021

Whether you’re planning on buying investment property or a new home, there are financial factors to consider. Knowing the details of your financial situation will help you make the best decision and help avoid unnecessary stress. If you’re trying to decide between renting and buying, here are some of the main financial things to go over:

Savings

Most financial experts advise you to save up to 6 months of emergency savings before you buy a home. Emergency savings are always a good idea to have, but when you’re considering purchasing a home, it becomes especially important. Before making a major investment, make sure you have the means to stay afloat in case something goes wrong.

Down Payments

It’s possible to purchase a home with a tiny down payment, but even the lower percentages are thousands of dollars. The bigger the down payment, the less money you owe to your lender. For this reason, many potential homebuyers opt for a larger down payment both to save on accrued interest and private mortgage insurance.

Debt-to-Income Ratio (DTI)

Most lenders will consider your debt-to-income ratio as part of your qualification for a loan. Luckily, this ratio is simple to calculate yourself. To find your own DTI, divide your monthly expenses—including loan and credit card payments—by your monthly gross income. This will give you a good idea of how you stack up compared to lender requirements.

Credit Score

Higher credit scores typically mean better chances of being approved for a lower interest rate on a mortgage. Your credit score comprises many financial factors. You can improve it by lowering your credit usage and paying your bills on time. While it might not seem important, even a percentage point matters for getting a good interest rate.

The financial part of home ownership can be overwhelming, but as long as you know the important metrics, you will make the best decision for your own situation. Keep these financials in mind to make the best choice.

About the Author
Author

Diana Plank & David Cline

Diana began her real estate career In 1980 and had two primary goals at that point, to obtain her Broker's License and to own her own company by age 30. She did both by the time she was 27! Diana has earned the following professional designations: Graduate Realtor's Institute, Certified Residential Broker, Certified Residential Specialist, C.D.P.E. E-Pro, S.R.E.S.

David comes from a background in Biology, Forestry and music.   He is co-founder of the Coastside Boys and Girl's club and has over 25 years of Real Estate experience.