Navigating the new world of real estate

DEPARTMENT

By Scott Steinberg

It’s back to basics with a financial budget and plan to purchase your new home.

From shifting Realtor commissions to ever-changing interest rates, today’s real estate industry is changing and evolving at an unprecedented rate. Thankfully, for prospective homeowners, the National Association of Realtors is predicting home sales to grow by 13.5% this year and market activity is increasingly robust in many areas across the country. That means there's still ample opportunity to find your dream home.

But purchasing your new home will take planning. Here are some tips that can help you better budget and plan for today’s new real estate financing reality as you get ready to purchase a house.

First: Do a financial check-up and audit.
Prior to purchasing a home, you need to know what you're capable of — both with a down payment and monthly costs. An audit of your current finances will help you create a budget. Ask yourself these questions and note your answers honestly:

Can you afford to make a sizable down payment (standard is 20%) on a home mortgage?
What’s your credit score?
Do you understand your debt-to-income ratio and how it might impact your ability to secure financing?
Which state, city, and neighborhood makes the most sense for you to buy in and what are the average costs of living in the area?
Do you have a steady, dependable source of income — and how might it grow, shrink, or fluctuate in coming months?

Second: Create a budget.
There are actually two budgets to create here: 1. A financial plan to sock away funds to purchase your new home and 2. A working budget for your new home.

In the above audit, you determined how much savings you have and what you plan to put toward your home. These funds can include equity in your current home. Decide whether you'll need more cash to put down, typically 20%, and devise a plan to save the difference. The plan could be short term or long term. Figure out what you’re willing to cut from your current spending and map out how long until you hit your goal.

For the second budget, consider what you can comfortably afford to spend monthly. Using the above audit of determined expenditures, compute a monthly budget for your future house, including mortgage and insurance payments. Experts typically recommend spending about 30% of your income on your mortgage. Visit the American Airlines Credit Union website to use the mortgage calculator to help factor the right costs.

Account for additional costs such as maintenance, upkeep, homeowners’ association fees, property taxes, utility bills, etc., in your budget.
Remember to set aside an emergency savings account with enough to cover 6-12 months of unexpected costs in case the need arises.

Third: Consolidate credit card expenses.
If you need to lower your expenditures, there are ways to do that. The biggest impact would be to control credit card debt.

Determine which of your existing credit card accounts have the highest APR attached.
Ask the Credit Union about lower-rate cards or debt-consolidation options.
Weigh terms and conditions, including length of repayment periods and total lifetime costs of financing.

Schedule a Financial Check-Up

Life is full of surprises — but with help from American Airlines Federal Credit Union’s Financial Wellness Department, it’s easier than ever to budget for an uncertain financial future. To find out how you can obtain financial assistance, improve your credit, or get a helping hand budgeting for a home purchase, be sure to schedule a Wellness Check-Up with Credit Union coaches and advocates today. Offering services personalized to your individual financial situation, certified counselors are standing ready to help offer support and guidance.

Scott Steinberg is an award-winning professional speaker and management professional. He's the bestselling author of Think Like a Futurist; Make Change for You; and Fast >> Forward: How to Turbo-charge Business, Sales, and Career Growth.