MINNEAPOLIS, Minn — A lot of people are eager to get into their first home but a big question you should ask yourself is: can you really afford it?
CEO and Financial Advisor Nicole Middendorf from Prosperwell Financial, says if you're in the market for a new home, consider these things first:
1. Don't just buy to buy
Even if you found your dream home, Nicole says don't spend more than you can actually afford.
"You really want to look at your monthly income for your home like your monthly mortgage," said Nicole. "You really don't want it more than 20 to 24% of your monthly income."
2. Do not buy a house if you do not have 20% down
"If you don't have 20% down you're paying property mortgage insurance, which is PMI insurance," said Nicole. "It's basically extra insurance because you are riskier and the company is taking more of a risk to buy that home because you have such little equity if you are not putting 20% down."
3. Pay off bad debt and try to get yourself in a better financial state
If you don't have that 20% down payment don't be discouraged. Nicole says now is the time to pay off bad debt and try to get yourself in a better financial state and make sure you can save enough for that initial down payment in the future.
Great advice for new home buyers, but what about those maybe looking to refinance with the interest rates so low?
Nicole says it really all depends because there are costs involved.
So a few questions to ask yourself:
- How many years will it take you to pay off?
- How far along are you in your loan?
- What was your interest rate before and is the new rate worth refinancing for?
- Are you planning on moving anytime soon?