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“Owning a home is one of the most important financial decisions you will ever make,” says Matt Winkelpleck, Senior Vice President-Lending. “But before jumping into the market, it is extremely important for consumers to consider the costs involved and to budget 
accordingly to ensure they’re able to meet all of their financial obligations.”
Begin by assessing your overall financial situation. Determine how much you can afford to put toward a down payment if you're buying, or a security deposit if you're renting. For home purchases, down payments typically range from 0% to 20% of the home’s price depending on the loan type. Keep in mind that there are also closing costs associated with a home purchase, and closing costs are always negotiable with the seller of the home. It's also important to maintain an emergency savings fund—ideally enough to cover three to six months of living expenses in case of unexpected financial challenges.
Think about your existing and anticipated financial responsibilities such as car loans, insurance, credit card balances, and student loan payments. It’s important to ensure you can manage all of these expenses along with the cost of your new home. A good rule of thumb is to keep your housing costs—including rent or mortgage and utilities—below 25% to 30% of your gross monthly income. Most loans now have a maximum debt-to-income (DTI) ratio of 45% - 50%, depending on your credit score.
Your credit score reflects your financial reliability, and it's an important factor when you're buying. Lenders will review your credit history for credit worthiness and current debt obligations. A low score might prevent you from securing a favorable mortgage rate. If your score is on the lower side, it may be wise to postpone your purchase and focus on improving it. You can find helpful advice on boosting your credit at aba.com/consumers or by consulting with a CNext mortgage professional to help guide you through rebuilding your credit.
Build a sample budget to estimate the true cost of living in your new home. Look into the typical utility expenses in your area, including electricity, gas, water, and internet or cable. Don’t forget additional costs like parking fees or trash collection, if applicable. Think about ongoing upkeep as well—such as lawn care and routine maintenance like changing air filters every few months. Be sure to include property taxes, mortgage insurance, and any homeowner association (HOA) fees. Many times, borrowers are able to qualify for more than they are comfortable paying each month towards a house note. So, it’s important to look at your complete financial situation.
In most cases, buying a home makes more financial sense if you plan to stay put for several years, as it allows you to build equity over time. Generally speaking, if you plan to live in the home for at least 3 years, then it’s a good idea to consider purchasing. Take a close look at your personal and professional circumstances to help determine how long you expect to remain in your next home.
Century Next Bank has a full-service mortgage department with people who are ready to help. Explore different mortgage loan types and get to know our lenders at cnext.bank/mortgage.
