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Three Things to Consider if You're Planning on Buying a Home

A midyear checkup of your financial plan is a good opportunity to review progress in working toward your goals and dreams. If buying a home is one of your financial priorities as we move into the latter half of 2022, you may be questioning if it’s a good time to buy.
Young couple unpacking boxes

The latest National Housing Survey signals you are not alone, as reported by a decrease in the Home Purchase Sentiment Index ® (HPSI) which gauges consumer attitudes toward homeownership, pricing and overall consumer confidence. Would-be homebuyers in this national survey relayed concerns about higher home prices, rising interest rates and the overall impact of inflation on their finances, with only 20% of Americans believing that now is a good time to buy a home1.

Whether your goal is to become a first-time homebuyer or upgrade to your dream property, there are some keys to being better prepared for purchasing a home in the current housing market.

  1. Align your home buying goals with your personal values - Before you go house hunting or get pre-approved for a mortgage, contemplate what it means to you to own a home. Identify if any changes in your career, finances, or family may be a factor in the future use of your home. Staying in touch with your values can help you remain realistic about your goals and manage the emotions that come throughout the home buying process.
  2. Understand the full cost of purchasing a home - Work with your lender to consider the loan options for your circumstances and be prepared for decision-making by knowing your numbers. To help you and your lender determine how much home you can afford, aim for a housing expense ratio of no more than 28 percent of your income. Those expenses will include mortgage, insurance, taxes and association fees. Be intentional about your budget to stay within this ratio as mortgage interest rates change, and maintain a strong financial situation, solid credit score and down payment throughout the buying process. Whether it is your first home or an upgrade to a larger house, build up ample savings for maintenance, repairs and unexpected expenses associated with owning the property. Take into account both upfront and ongoing costs of buying your next home, considering the cash-flow you need to meet all costs of home ownership.
  3. Recognize how a home purchase fits in your overall financial plan - Many people have multiple financial goals at once, such as saving to buy a home, building a retirement nest egg, and funding college. Partner with a Certified Financial Planner™ to help you prioritize your goals, review time horizons, and identify strategies that fit your unique situation. Revisit your financial plan on an annual basis or more frequently if circumstances change. This approach to balancing your goals will help you avoid shortchanging long-term priorities such as retirement savings.

Buying a home is one of the most important decisions many people make as it impacts their finances, family, and future. Our team of D.S. Baker Advisors at Baker Boyer can help you feel confident in your home buying decisions and maintain a focus on your overall financial goals.

1 Fannie Mae National Housing Survey, June 2022 https://www.fanniemae.com/research-and-insights/surveys-indices/national-housing-survey