All Financial Education

Making the Decision to Buy a Home

September 24, 2020

Family in front of new home

When it comes to buying a home, there are many questions to consider. Your home is one of the most important parts of your life. It’s where you will spend most of your time, raise your family, complete major life goals, and make many memories. It’s important for your home to be the right home for you. Whether you are a first-time home buyer or ready to upgrade to a new home, there are some vital questions to ask first to help you make the best decision for you.

Rent or Buy?

One of the first questions you may ask yourself is whether you should rent or buy. It takes more than looking at just your monthly payment to answer this question. Buying a home includes fees such as Private Mortgage Insurance (PMI), closing costs, a home warranty, maintenance expenses, Home Owners Associate (HOA) fees, and more. When renting, some of these costs might be eliminated, but there are other expenses such as renters’ insurance, not being able to build equity while rates potentially go up each year, and some maintenance fees. The market also changes frequently from a rental market to a buyer’s market. Major cities in Idaho are at the peak of the housing market: mortgage rates have been at an all-time low, and buyers have more buying power. In addition, as there are more newly built houses and newly renovated houses, buying seems to be the current trend. At Idaho Central Credit Union, we provide a tool called the Rent vs. Buy Calculator that helps you break down the cost comparison to help you make the decision.

How much can I afford?

Now that you’ve determined whether it’s a better time for you to rent or buy, let’s take a look at how much you could actually afford to buy. It is generally recommended that buyers take out a monthly mortgage payment that’s less than 30% of your income. However, many people have different needs that may change this calculation. For example, you may want a home in an area with great schools for your children, a home that’s close to hiking and biking trails for your lifestyle, or a home that’s close to your work so you can commute less daily. At Idaho Central, we provide another tool called the Mortgage Qualifier Calculator, which helps you find out how much you can borrow based on your annual income. It can also calculate how much you can borrow based on your desired monthly payment. You can even plug in a loan term and interest rate to get an estimate!

How much am I actually going to be paying?

Once you’ve determined how much you can afford, it’s time to find out if your dream home is in your budget after all. As mentioned earlier, there are many fees that come with owning a home. The interest rate and loan term will also change your monthly payment. For example, if you can afford a bigger monthly payment and would rather pay less on interest to pay the loan off faster, a 15-year mortgage loan might be a better fit than a 30-year mortgage loan. A 15-year mortgage loan typically comes with a lower interest rate, but a higher monthly payment. On the other hand, if you are not planning to stay in this home for long, an Adjustable Rate Mortgage (ARM) might be a better fit. An ARM loan usually starts with a lower interest rate that provides lower monthly payments and you can use our Adjustable Rate Mortgage (ARM) Calculator to determine your payment. If you are hoping to get a regular conventional mortgage loan, you can also use our Home Loan Calculator to find out what your monthly payment would be.

Now that you know how to find these tools and how much home you can afford, let us provide the service you deserve. Idaho Central Credit Union has become one of the top mortgage lenders because of our low interest rates, our customer service, and our mission to help our members achieve financial success. Contact one of our Mortgage Loan Officers today to see how we can help you with a dream loan for your dream home!