Is the inkling arising that you may be ready to buy a home? Are you thinking about securing your space in Hawaii paradise?
Before you rush into one of the biggest transactions you may ever make, take some time to contemplate homeownership. Buying a home can offer financial responsibility, stability, and equity, and contemplating a few aspects of homeownership prior to purchase can ensure a happy home.
Will this neighborhood be my home for long?
While we cannot predict the future, it is recommended that you ideally stay in your first home for three to five years before moving again. Those years in your new place help pay down the mortgage and gain equity, so you can transition to a new place.
If you know you will want to go to a different neighborhood or island within the next year, it may be better to wait and save more for a larger down payment. Then you could possibly buy the house of your dreams in your desired neighborhood.
If you do unexpectedly move out of the neighborhood, you could always rent your home, but being a landlord has a whole other set of considerations.
Can I fix things?
Being a homeowner means being responsible for repairs and home upgrades. You have two options:
- Fix your home yourself.
- Pay money to hire someone.
If you are a do-it-yourselfer with some home repair experience, you can save on labor costs, but the costs of materials should also be considered. A new refrigerator isn’t cheap. Repairs are a part of homeownership and considering them financially and psychologically prior to purchasing a home will assist in getting started on the right path.
Do I have a stable job?
Are you happy in your job now? Is your current career satisfying or do you plan on shifting your path any time soon? Transitioning jobs while paying a hefty mortgage can be tricky, so a stable job and career will also lead to greater stability with your house purchase.
- How much credit card debt do you have?
- How much are your student loans, auto loans, or personal loans?
Your total monthly debt payments, including the desired mortgage amount, should be less than 43% of your gross monthly income for most mortgage programs. Another debt-to-income ratio used by lenders says the monthly mortgage payment should be less than 28-31% of your gross monthly income.
In addition to debt amounts qualifying you to buy a home, habits of responsibly paying loans and handling credit cards, help develop positive mortgage-paying habits.
- What’s your credit score?
Do you have an excellent 820 or average 620? Your credit score is an important number that lenders use to qualify potential buyers for a home. Getting your finances in order is essential in realizing your dream of homeownership.
Do I have money for a down payment and closing costs?
A huge chunk of money is often needed for a down payment, ranging from 20, 15, 3, 3.5, 5, and even zero percent down to qualify for a loan. For a $700,000 house in Hawaii, that could mean $140,000 for 20% down. Also, the closing costs, insurance, taxes, and money for furniture and repairs should also be saved prior to purchasing a home.
If you can afford the upfront costs associated with purchasing a home in Hawaii, while also having extra cash to breathe the fresh Hawaiian air, you are well on your way to starting your home buying process. We dive deeper into finances and closing in our other buyer’s guides.
Can I really afford the home payment?
If you are used to paying monthly rent, a monthly mortgage payment that goes toward your own home instead of someone else’s may make sense. However, when making your monthly house payment calculations, be sure to not only include the principal and interest of your mortgage loan but also the following:
- Property taxes
- HOA/condo fees
- Water, electricity, Internet, and other utilities
- Repairs and upkeep
Doing the math about all the costs of Hawaii homeownership before buying, will help to assure you make a sound financial decision.
Is it the right time for me to buy a home?
If you were not able to answer ‘yes’ – don’t worry! Homeownership is a huge responsibility. Maybe renting is right for you, or your dream home in paradise will come at a later time.
If you answered ‘yes’ to the above questions, it may be the right time to get started on your home-buying journey. Get your finances in order and build your team to begin making your homeownership dream a reality.