How to Finance Your Next Home Purchase

Welcome back to our 8-week series, How to Find the Perfect Home for You and Your Budget. Our goal? Showing you how to match your wants, needs, and budget for your next home. Yes, you can dream big and still stay within your financial comfort zone. Even if you’re feeling more financially secure thanks to the sale of your current home, moving up requires a careful strategy and a lot of self-reflection.

Let’s Talk Financing

When you’re ready to make the leap to a new home, understanding the ins and outs of financing is non-negotiable. Whether it’s your first time or you’re a seasoned pro, knowing how to navigate the financial landscape is crucial—especially when buying and selling at the same time.

Here’s what you need to know to make sure your home-buying journey is smooth and successful.

Don’t Do This

First, let’s cover what not to do:

Do Not Set a Price Before Talking to a Lender Guessing what you can afford without consulting a lender is like trying to navigate a Northern Colorado snowstorm without a map. You might end up somewhere, but it probably won’t be where you wanted to go. Don’t pick a random number like $500,000 and start attending open houses. It’s tempting, I know, but without proper guidance, you could end up in a financial bind.

Do This Instead

Follow these steps to ensure your financial ducks are in a row before you fall in love with a home:

1. Decide Your Monthly Budget Focus on what you want to pay per month before setting a price range. This is the most crucial decision. Your lender and I will then work together to make sure you get a home that fits within your monthly budget. Remember, the lender may approve you for more than you want to spend.
   Pro Tip: Conservative advice suggests spending about 30% of your income on housing. In high-cost areas, it might creep up to 40%, but don’t stretch beyond that.
2. Explore Loan Options for Buying and Selling Simultaneously Timing the sale of your current home with the purchase of your new one can feel like trying to juggle in a windstorm. Thankfully, there are loan options designed to make this easier. Consider a bridge loan or a home equity line of credit to tide you over until your current home sells. These financial tools can save you from the dreaded double move or paying two mortgages at once.
3. Understand the Market and Adapt Your Strategy The market in Northern Colorado can shift like the weather—sunny one minute, a blizzard the next. Be in touch with me early so we can craft a strategy that aligns with your goals and the market conditions. Sometimes it’s about making an offer contingent on selling your current home, other times it’s using those financing options mentioned above.
4. BONUS: Mortgage Tips to Keep You on Track
   • Knowing How Mortgage Payments Are Calculated: Every $10,000 change in your loan amount affects your monthly payment by about $65-$75.
   • Credit Score Matters: The higher your score, the better your interest rate. Your score is based on your credit history, not your income.
   • Long-Term Plans: If you plan to stay in your home for only a few years, consider an adjustable-rate mortgage (ARM). They’re safer than they used to be.
   • Points and Interest Rates: Paying points can lower your monthly payment but consider if it’s worth the upfront cost.
   • Beware of Hidden Fees: Ask your lender to break down all fees and closing costs to avoid surprises.

I’m Here to Help!

You’re now armed with the knowledge to start your home-buying journey on the right foot. Remember, the key to a smooth process is preparation. Reach out to me well before you’re ready to move, and we’ll figure out the best financing strategy for your budget and goals.

I hope you’re finding this series, How to Find the Perfect Home for You and Your Budget, helpful and informative. Stay tuned for next week’s article, Putting It All Together, where we’ll align your budget, location, and home criteria to help you find a home you’ll love and afford.

Keep dreaming big, Northern Colorado. Let’s make those home dreams a reality without the financial nightmares!

Your Go-To Real Estate Expert in Northern Colorado, 

Lauren