financial factors to consider when buying a home

5 Financial Factors to Consider When Buying a Home

One of the greatest luxuries in the world is being able to own your own home. It saves you from paying thousands of dollars every year in rent for a property that will never even be yours.

People are often skeptical when taking this step and do their research thoroughly; they see the economic, political, and social makeup of a society they wish to invest in before going for such a big investment. Like if you are buying a home in Boise Idaho you may be wondering that Is it Expensive to Live in Boise Idaho? So today in the article we will discuss some factors that you need to know when buying a new home.

Financial Factors to Consider When Buying a Home requires a lot of care and contemplation. Here we bring you different financial factors you need to think of when buying your house.

Budgeting and Financial Analysis

financial factors to consider when buying a home


Budgeting and financially analyzing your position and the property’s worth will help you have a better understanding of your situation and whether you can or should buy it or not. 

When people go for investments like purchasing a home or buying stocks, they often consult with their friends and family who have gone through the same process or talk to professionals. People who have already had this experience bring valuable financial insight into the mix, and you can develop a better budget for buying your home. 

If no one can guide you regarding a home purchase, you can consult online resources. For instance, if you live in Arizona and are a first-time home-buyer, then hop onto google and type, “first time home buyer Arizona,” you’ll immediately see relevant search result to your query. Go through the results, and you will be equipped with the knowledge to make decisions.  

When you are budgeting to buy your home, it is often advised that you over-state your expenses by around 10 percent to stay on the safer side. 

In addition, one useful tool that you can choose for better financial forecasting analysis is the debt-to-income ratio. It will help you see whether you can afford a certain property or not. 

Insurance and Taxes

financial factors to consider when buying a home


Ensuring your home against disasters and damages is a very important step. The best way to proceed with this is to add homeowners’ insurance to your already drafted insurance plan. 

Property taxes can be paid as part of the mortgage plan or paid separately. If you try to avoid paying them, then they will mount up and make it difficult for you to pay them at the end of the year. 

Your bank will give you an insurance plan based on the actual mortgage of your property. You will also have to pay the Private Mortgage Insurance (PMI) as part of the insurance plan as your guarantee if you haven’t put a 20 percent or more down payment in. It costs you around 0.5 percent or 1.0 percent of the total amount annually. 

Closing Costs and Applications

financial factors to consider when buying a home


There is a cost for everything that you buy or sell. Even when you purchase your own home, you will encounter countless expenses. Some expenses that you will likely encounter are:

Home-Inspection Expense

A home inspection is not part of the home-appraisal fee, as many think. Rather it is an independent expenditure. It helps establish the home’s value; an inspector analyzes the house to see any problems before the purchase and points them out for the owner to get them fixed before the sale. It might cost hundreds of dollars. 

Mortgage Application Expense

A mortgage application fee is charged by lenders when you are applying for consideration. It can cost several hundred dollars; however, it is a necessary expense. 

Closing Costs

Consult a financial expert or a real estate expert to see all the costs you will incur while processing the paperwork for your property. Agencies at the government and private levels are involved in the process and have standard or varying fees. Moreover, be alert and active when signing any documents and paying for anything. 

Down Payment

financial factors to consider when buying a home


You will have to pay at least 20 percent of the total payment as a down payment for the house. It may seem a lot, but if you look at the bigger picture, you’ll see that it can save you the money you’ll have to otherwise pay as PMI. 

If you want to get your hands on your home sooner than expected, you can draw a piggyback loan simultaneously as a principal mortgage loan. This is usually an 80/20 arrangement where the 20 percent is subjected to varying interest rates and is not added to the bottom-line equity that goes into loan repayment. 

Some government plans have also been initiated for people who cannot afford a down payment; you need to explore these options as they are quickly dwindling amid the rising inflation in the market.

Also Read: 10 Best ETFs for 2022: All You Need to Know

Utilities and Memberships

financial factors to consider when buying a home


When buying a dream home, look at the vicinity of the house, the utility expense you’ll have to bear, and the membership fee you might have to pay for society or association. You need to evaluate the cost of living comfortably in the area and see whether you can afford it or not. 

Try searching for average utility bills per month for people who already live in that vicinity and talk to them about how they manage their utilities. 

If you are a part of the homeowner’s association (HAO), you’ll probably have to pay a hefty sum for maintenance and upkeep to stay consistent with their rules and policies. Hence, it is better that you have thorough information about how much cost you’ll incur annually to see whether you’ll be able to afford it.

Bottom Line

Buying a home depends on various factors, and each of them needs to be monitored properly, keeping the window of unpredictability in mind. 

Calculating the total finances is a science well within its right, and you have to learn it to make a good financial decision. 

This article details the basic monetary factors you need to look into before purchasing a house, and hopefully, it will help you develop a better understanding.

Hope you enjoyed the article and it helps you in your buying journey. Happy Reading.