It probably feels like you’ve waited forever to build your forever home, but before you sign on the dotted property line, ask yourself these questions to make sure you’re really ready.
Are your finances in order?
Add up your monthly expenses — credit cards, auto loans, student loans, current rent or mortgage, cable and internet, phone plan, and other recurring payments — and divide that by your gross monthly income (income before taxes) to determine your debt-to-income (DTI) ratio. This number will help you determine how much home you can afford. The lower your ratio, the better. Ideally, you want your DTI ratio to be 43% or lower.*
Have you saved enough?
Even buyers with good credit should expect a 5%** down payment (10%** down in Florida), plus an extra 15-25% for finishing costs like landscaping, a mail box, or fencing. At Lake Michigan Credit Union, we have low down payment options, and our one-time close construction loan will save you money in closing costs.
Can you afford the monthly payments?
It’s not just your home you’re paying for each month. You’ll also need to pay property taxes, insurance, homeowner’s association fees, city assessments, water, sewer, garbage, utilities, and repairs. All of these expenses should be taken into consideration when planning your monthly budget.
Can your home live up to the hype?
This is your once-in-a-lifetime opportunity to build the home of your dreams, but chances are, you haven’t been daydreaming about central air. To make sure you get everything you need AND want, make a list of your needs and wants. In the “needs” category, list the features your home must have, like air conditioning and four bedrooms. In the “wants” category, list luxuries like a fireplace in the bedroom and an in-ground pool. When you’re all done with the needs, do you have enough left over for the wants?
Have you considered buying new instead of building new?
Most builders have homes that are already built and move in ready. You might prefer to build, but if there’s a home that checks most of your boxes, you could save significant time and money without sacrificing your dreams.
Are you committed to the area?
If you’re already looking at homes in a specific area, consider what the traffic is like (and not just at 8 a.m. on a Sunday morning). How are the schools? Any railroad tracks or airports nearby that could be a nuisance? Remember, you’re not just purchasing the house. You’re buying into the neighborhood.
If you’re still ready to build, do your homework before picking a lender. Not all financial institutions offer the same loans or charge the same fees. LMCU is Michigan’s number one construction lender*** and we’ve helped thousands of homeowners. Visit LMCU.org/Mortgage or call us at (844) 754-6280 to get pre-qualified.
*Credit Karma, 2019.**For well qualified borrowers.***MarketTrac, February 2020. LMCU NMLS #. An Equal Housing Lender.