Menu #8: Unlocking the door to homeownership

STATS STACK 🥞

23 minutes after entering a supermarket, shoppers begin using the emotional part of their brain rather than the cognitive part, which makes it harder for them to consider costs and makes them more susceptible to marketing bargains (Source: The Hustle).

$277 billion is the amount that the trillion-dollar Nvidia stock market value rose in a day — thanks to an impressive earnings report. To put that number into perspective, their one-day growth was $23 billion more than the entire market cap of Netflix, which is currently worth $254 billion (Source: AP News).

$417,700 was the median home sales price as of the fourth quarter of 2023. That's a 37% increase from the first quarter of 2020, when the median was $329,000 (Source: Federal Reserve).

DEEP DISH 🍕
Unlocking the door to homeownership

Buying a home is often seen as a big step towards achieving the American dream. You'll find plenty of articles, podcasts, and books that sing the praises of buying over renting. And don't get us wrong, we’re all for building wealth through homeownership. But, it's a massive commitment—the biggest purchase most people will ever make. So, it deserves a lot of thought and careful planning. Here are five key things to keep in mind before you dive into buying a house.

1. Keep your monthly mortgage manageable: It's easy to get swept up in the excitement when you're house hunting, especially after the bank gives you that pre-approval. But just because you can borrow a certain amount doesn't mean you should. Aim to keep your monthly mortgage—this includes the principal, interest, taxes, and home insurance—below 30% of your take-home pay. This way, you'll have room in your budget for those unexpected expenses, like when the AC suddenly quits on you. Unlike renting, where you can just call your landlord, these repairs will now be on you.

2. Upfront costs: The home buying process comes with its fair share of upfront costs, including a down payment and closing costs. Depending on the type of mortgage, the minimum amount you might need to put down is anywhere from 3.5% to 5% of the home's price, plus another 2% to 6% for closing costs. For a $400,000 house, that could mean shelling out between $22,000 and $44,000 upfront. It's a big chunk of change, so you might need to plan and save for it.

3. Your credit score matters: Your credit score is a big deal when it comes to buying a house. Lenders will scrutinize your credit report to decide if you're loan-worthy. A higher credit score not only makes it easier to get approved but can also save you a ton of money in interest over the life of your loan. If your score could use some work, it's better to know early so you can improve it before applying for a mortgage.

4. Thinking of moving soon? Buying a house is a long-term commitment. If there's a good chance you'll move to another city or state in the next couple of years, you might want to hold off on buying. The costs and hassle associated with buying and then selling a home can make it a financially unwise move if you're not planning to stay put for a while.

5. Other debts: If you're currently paying off other big debts, like a car loan or student loans, you might want to think about clearing those first. Fewer debt payments mean you can save up for your home faster and have more breathing room in your budget for those inevitable home maintenance issues once you're a homeowner.

Remember, buying a home is a big deal, and it's worth taking the time to make sure you're ready for all that comes with it.

SWEET LINKS 🍰
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