Financial Literacy Month & Home Ownership – 3 Tips
April is National Financial Literacy Month and that means it’s a good time to do a check-in and gain some new knowledge of your financial situation. For some of us, that means eliminating any discretionary expenses for the year and reassessing our yearly budgets. But, for others, it is also a great time to plan out a path to home ownership!
Here are a few tips for thinking through your financial situation and planning for you and your family:
1. Take a close look at your budget.
Home ownership can feel like a daunting topic to think about, especially for buyers who will be first-time homeowners, but taking a close look at your budget this month can help you navigate your path toward owning a home!
First, you may want to determine if there are any weekly or monthly discretionary expenses that can be eliminated from your budget. Then you’ll be better equipped to decide what you could start putting into savings for a down payment on a new home or any repairs that may need to be made to a property you’d like to purchase in the future.
Once you’ve decided how much you can save regularly, you can build a tentative timeline for reaching your goal. Depending on your price range for a new home, your down payment or repair costs could differ significantly. The average down payment in America is approximately 6%* (this varies largely based on the housing market in your area and your type of mortgage) and as a rule of thumb, it is recommended to have 1% of the home’s value saved for yearly repairs. Keep these numbers in mind when planning your savings goals.
2. Determine the best type of loan for your financial situation.
There are several types of mortgages available to you when you’re ready to make a purchase. A fixed-rate mortgage is by far the most popular in the U.S. and it is a loan with a set interest rate that is locked in for the full term of the loan, typically 10 to 30 years. After you’ve planned out your savings, it’s great to get familiar with which loan option would be the best fit for you and your family. Here are a few examples:
- Conventional: This fixed-rate mortgage can typically fund up to 97% of your home’s purchase price. That means, depending on your credit profile, your down payment could be as little as 3%.
- FHA: This mortgage is insured by the Federal Housing Administration and is usually easier to qualify for than conventional loans. This mortgage option can usually fund up to 96.5% of the overall home cost, meaning your down payment may be as low as 3.5%.
- VA: This loan is reserved for veterans or service members and their spouses. It offers the option to put no money down and can fund 100% of your home purchase.
- Rural Development: Similar to the VA loan, this mortgage can fund 100% of your purchase with a $0 down payment. However, to receive this type of loan, the property has to meet certain geographical requirements.
There are several other loan options available as well and if you’d like to know more, the Mark Hite Team works with the best lenders in the area and we can get you connected with a mortgage expert for more information.
3. Keep an eye on the housing market in your area.
Before you take the plunge into searching for a home, it is beneficial to better understand the real estate market in your area. You can do that by staying up to date with real estate and property trends in your own neighborhood. Keep an eye on what homes are selling for nearby with similar square footage as what you will be looking for when you start your search with a realtor.
Here in the Chattanooga area, the real estate inventory may seem slim for buyers, but in fact, in 2021 we had a record number of listings and sales! New listings in 2021 were up 7.7% compared to 2020 and closed sales were up 9.9%. The primary difference is how many days properties are on the market. In 2021, the average days a property was on the market was 22, compared to 43 in the year prior.** Although houses aren’t lasting long, there is still a huge selection! It’s best to be prepared to make an offer on your dream home once you find it!
The next step in understanding the housing market in your area is to ask the experts around you and rely on their advice and guidance throughout the process. At the Mark Hite Team, we are here to assist you every step of the way in navigating the real estate market and partnering with you to find your dream home!
If you’d like to learn more about homes available in the Chattanooga area or if you’d like to chat with one of our agents about how to start your path to home ownership, reach out to us today at 423.667.9385!
* Rocket Mortgage
** REALTOR 2021 Market Report