From Tying the Knot to Buying the Lot — 5 Questions to Ask Before Homeownership

While many newlyweds prefer to rent instead of jumping right into homeownership, owning real estate offers multiple advantages. Homeownership can give you a sense of security and shield you from rent increases. Residential real estate is also an asset that generally appreciates over time, building passive wealth through home equity.

Though it’s easy to get swept up in romantic notions of buying a house as newlyweds, this should be a sobering experience, with decisions based on logic, not emotion. Otherwise, you may commit rookie mistakes with costly long-term consequences that drive a wedge between you and your spouse.

Here are the five questions you should ask yourselves to make the most significant investment of your lives prudently.

1. How Do You Plan to Pay for It?

You have two options — cash and credit. It makes sense for most people to fund a home purchase by combining both methods, but you can exclusively use either of the two extremes.

If you have substantial savings, strongly consider buying with cash. It helps keep your combined debt level low and gives you more room to manage your budget.

In January 2024, nearly a third of all homebuyers didn’t seek financing. However, the rate was lower among buyers of primary residences at 19%, suggesting that more Americans still chose to take out a mortgage without waiting for interest rates to decline.

2. What Are Your Debt Levels?

You don’t have to be 100% debt-free to qualify for a mortgage. Lenders will let you borrow money if you satisfy a home loan’s debt-to-income limit. Divide your total monthly debt payments — including your expected monthly housing expenses — by your gross monthly income to calculate your DTI ratio.

Meeting a mortgage lender’s DTI limit may qualify you for a home loan. However, it isn’t necessarily the green light to pull the trigger on your purchase. Personal finance expert Rachel Cruze advises people to pay off all their debts and set aside three to six months of emergency financing before buying a house. This strategy will ensure you have enough to cover expenses like closing costs and inspection fees and prevent you from taking on more than you can realistically afford.

3. Which Local Houses Can You Afford With Your Household Income?

Nearly one-quarter of American homeowners say their homes are too small. While no-money-down financing programs can help you get more than you might otherwise afford, they are also risky. When you factor in the interest, these home loans make your purchase more expensive. They also make it more challenging to build equity on the property.

Getting preapproved by a lender will tell you whether you have the purchasing power to bid on a property that satisfies your family’s space needs. If all listed local homes with sufficient square footage are too expensive, you and your significant other may have to shop around in a different market or settle for something smaller — a compromise most refuse to make.

Alternatively, search for a habitable spacious house with some cosmetic defects, which you and your better half can improve to your liking over time. These properties usually have lower asking prices but can cost more to maintain over time.

If you can’t afford your perfect home, try again when your credentials improve. Increasing your earnings, zeroing out your car loan and regularly paying your credit card balances in full should boost your creditworthiness.

4. What Is the Highest Monthly Mortgage Payment You Can Manage?

A manageable monthly mortgage payment is an amount that isn’t too burdensome. The two of you should be able to repay it without sacrificing your comfortable lifestyle.

Many people gravitate toward lengthy mortgage terms to keep their monthly payments as affordable as possible. This strategy is logical if you’re more motivated to minimize your regular housing costs than to pay less interest over the life of your loan, build equity faster and own your home free and clear more quickly. If it’s the other way around, select a shorter mortgage term.

Furthermore, think beyond principal and interest. Monthly mortgage installments may also include insurance and property tax. For example, you may have to pay for private mortgage insurance when your down payment is less than 20% to protect your lender in case of default.

5. How Much Down Payment Can You Pay?

The size of your down payments affects how expensive your mortgage will be. Putting more money down reduces the principal balance, minimizing loan installments and interest payments.

If you can’t pay at least one-fifth of your chosen property’s appraised value upfront, ponying up an amount close to it will ultimately save you on PMI. It helps shorten the time needed for your mortgage principal to drop down to 78% of your home value — the point where your mortgage servicer will automatically remove this insurance premium from your monthly payments.

Moreover, your down payment amount represents your home equity when you move in. Less equity raises the risk of your balance exceeding your property’s value if the economy tanks.

Paying a generous down payment even when your lender doesn’t require it takes considerable willpower, especially when you have other expenses. Fortunately, you can beef it up with first-time homebuyer grants and monetary gifts from family and other donors your lender deems acceptable.

Discuss Your Financial Situation Before Buying a House

A house is probably the most expensive purchase you’ll ever make. Rushing into decisions at any point in the process can place unnecessary strain on your finances and relationship with your new spouse.

While answering pragmatic financial questions may dampen your enthusiasm, don’t skip this step. Openly discussing your finances with your partner will let you choose a home that aligns with your needs and aspirations, creating the foundation for a stable and loving family life.

Author Bio: Oscar Collins is the editor-in-chief at Modded, where he writes about a broad spectrum of topics. Follow him on Twitter @TModded for frequent updates on his work.

are you a bride or groom-to-be?

We'd love to plan with you on weddingday-online.com. Let's get started!

 
are you a wedding extraordinaire?

Join WeddingDay Magazine in inspiring brides by partnering with us! See how here.