Jane Dunlap - New England R. E. Center, Inc.



Posted by Jane Dunlap on 9/9/2018

Buying a home is one of the biggest purchases that youíll ever make in your lifetime. Youíll spend decades of your life making mortgage payments to pay off your home loan. Buying a home is more than just simply finding a place to live. Itís also a financial decision. Your home helps you to build equity, gives you tax deductions, and helps you to have some security in your financial future. 


One of the biggest questions that youíll have when you buy a home is ďHow much can I spend?Ē To answer this question, youíll need to dig a little deeper. 


Do You Have Money For A Down Payment?


The standard amount of money that youíll need for a down payment is 20 percent of the purchase price of a home. If you donít have the money for a full down payment, youíll need to pay for private mortgage insurance (PMI). This could add up to be an extra cost of hundreds of dollars per month in additional insurance payments on top of your mortgage and every other kind of expense that goes along with buying a home. Youíll need to take the time to save up for a down payment if youíre a first time homebuyer. If you already own a home, the equity that you have in that home can help you with the down payment.


What Are Your Other Financial Responsibilities?


Thereís more to buying a home than just the monthly mortgage payment. Youíll need to get insurance, pay taxes, and have some money set aside for repair and decorating costs. Youíll need to look at your monthly income to find out just how much you can afford on a home. You should take an honest look at your lifestyle and existing expenses in order to determine a comfortable monthly mortgage payment for you.    


Know Your Credit Score


Your credit score will be a major factor in how much house youíll be able to afford. Your lender will use your credit score and credit history to help determine what type of interest rate youíll get and how much theyíre willing to lend you in order to buy a home.


Understanding what you can afford for a home purchase is crucial before you even start shopping. Itís a good idea to meet with a lender to get pre-qualified. This is different than getting pre-approved. Your lender will give you a general idea of how much you can spend on a home without digging too deep into your finances. Getting pre-qualified is a great place to start when youíre looking at the numbers of being a homeowner.




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Posted by Jane Dunlap on 9/17/2017

Your 401K is a great resource of investing for retirement. Many people use their 401kís as a part of their overall investment strategies, pulling money out of it when itís needed. When youíre ready to buy a house, you may think that pulling money out of your 401k for a down payment is a good idea. But think again. 


Although you should always speak with a financial professional about your money matters, the bottom line is that is probably not the best idea to use your 401k to supply money for a downpayment on a home. 


First, your 401k funds are pre-tax dollars. That means that you havenít paid any taxes on these funds. Your employer will often match the amount of money that you put into your 401k, as an incentive to help you save money for your future. You need to keep your 401k for a certain amount of time before any funds in the 401k become available to you without having to pay any kind of penalty. If you decide to take on the penalty, you can often face a cut to your employerís match programs as well. This is why you must make this decision wisely. 


The Penalties


Anyone under the age of 59.5 pays a penalty of 10 percent to take the money out of the fund. In addition, youíll now need to pay taxes on this money, because it becomes a part of your adjusted gross income. 


Alternative Actions


If you are looking to invest in a property, there may be other options for you rather than pulling money out of your 401k. While some plans allow you to borrow money from it. However, if your only option to get money to invest in a property is to pull money from your retirement account, it may not be the best time to invest in property for you. 


Keep It Separate


If youíre younger (say in your 30ís or 40ís) your best option is to have a completely separate account that is used to save for a downpayment and other expenses that youíll incur when you buy a home. In this sense you arenít spreading yourself too thin as far as investments go. You should compartmentalize your money. Buying a home is a large investment in itself. Home equity can also be a good source of a nest egg in later years when you need it. However, even if a property will be an income property, itís never smart to take from one investment account to provide for another unless youíre shifting your focus. You donít want to reach retirement, only to see that your funds have been depleted and you canít retire as expected.




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