After you and your partner get married, you probably feel eager to start your new lives together. For many couples, this involves buying a home in NJ. It’s time to settle down with your spouse, and your combined incomes can make homeownership a more feasible goal. This is a massive financial commitment, though, so it’s normal to feel overwhelmed.
Preparing to buy a NJ house is a stressful but exciting experience, and having your new spouse by your side can make the process so much better. Here are five NJ home buying tips for newlyweds:
1. Know your credit history.
Your credit score and credit history are key factors in whether or not you’ll be approved for a home loan and what interest rate you can get for your mortgage. Credit scores are calculated based on a number of components, including the length of your credit history, the number of total accounts you have, and the number of payments you’ve missed. Most buyers need a credit score of at least 620 to buy a house, but a higher score will earn you a better interest rate.
If you’re not already aware of your and your spouse’s credit histories, you should obtain a copy of both credit reports before you begin your NJ homebuying activities. This will confirm that you have the creditworthiness needed to become a homeowner, and it can show you what areas you may need to work on if you want to get better mortgage terms.
One of the biggest goals for most newlywed couples is to reduce their debt-to-income ratio. This is the percentage of your monthly income that goes toward debt repayment, including your mortgage or rent costs. Not only does reducing your debt strengthen your credit score, but it can also help you get approved for a larger mortgage. Many banks like to see a debt-to-income ratio of less than 36 percent.
Some newlyweds find that one spouse has great credit and the other has poor credit. In this case, the partner with the higher credit score could apply for the mortgage in their name alone. However, you should ensure that both spouses are listed on the property title.
2. Think about your current and future needs.
Before you start the NJ homebuying process, both partners should have a general idea of what they’re looking for. First, determine whether you want to purchase a starter home or a house you’ll live in for decades to come. Most real estate experts suggest that you only buy a home if you’re prepared to live in it for at least five years. Your needs in the next few years may be very different than your needs in 10 or 15 years, though. Maybe all you’re looking for right now is a small and affordable house that fits you and your spouse, or maybe you hope to find a home with enough space to raise children.
In addition to considering space and location, you also have to think about your budget. How much money can you put toward a mortgage each month without feeling financially strained? Are you expecting any major financial changes in the next few years? Be careful not to rely solely on your mortgage pre-approval for this step. You might be approved for a large monthly payment, but this doesn’t mean that you can realistically afford it. Newlyweds typically have more success searching for homes at the lower end of their price range so that they have some flexibility in their budget as they adjust to life as homeowners.
3. Be ready to compromise.
As a newly married couple, you and your spouse probably aren’t strangers to compromise. Although compatible partners see eye-to-eye on a lot of ideas, no two people will ever agree on everything. Learning to make sacrifices and meet in the middle with your spouse is one of the best life lessons for newlyweds, and your journey to becoming homeowners can put those skills to the test.
Both partners should separately write a list of their priorities for the new house. This includes factors like location, size, number of bedrooms, or amount of renovation needed. Then, you should list your needs and wants in order of importance. When comparing your list with your spouse’s, be prepared to sacrifice some of the lower items on your list so that you can both fulfill your most important NJ homebuying needs.
4. Be wary of predatory loans.
Working with a trustworthy real estate agent will help you avoid bad sales or predatory loans, and improve the NJ homebuying process. Newlyweds are often so eager to become NJ homeowners that they’ll agree to deals that aren’t in their best interest. For example, you might get approved for a home loan with an exceptionally low interest rate, but the fine print describes massive late fees or other penalties. If something seems too good to be true, consult with a NJ realtor or financial expert before you move forward.
5. Consider house hacking.
Buying a house in this day and age can be difficult. Home prices are rising, especially in cities that are attractive to young professionals. If you and your spouse are excited to become homeowners but are concerned about the financial strain it may cause, you could consider house hacking.
House hacking is the practice of renting out part of your home so that your rental income covers a substantial portion of your mortgage. In most cases, couples who house hack buy a duplex or multifamily property, live in one unit, and rent out the others. You could also house hack by renting out a spare bedroom in your home, but most newlywed couples prefer to keep their space to themselves.
In many cities, the average monthly rent is notably higher than a mortgage payment for a similar space. You and your spouse could rent out the other half of a duplex for almost as much as your entire mortgage payment, which dramatically reduces your cost of living.
While house hacking can be an excellent way to save on your monthly expenses, it’s not a decision to take lightly. You’re not guaranteed to have a renter at all times, so you should always be able to cover the entire mortgage on your own if necessary. Vetting renters can be tough, and there’s always a risk of renting to someone who doesn’t pay or who damages your home. Being a landlord is a big responsibility, too, so you have to be prepared to make timely repairs or hire someone else for maintenance.
You and your partner should take your time as you get ready to buy a NJ house. Do your research before you look at NJ homes, and make sure you’re both on the same page. As stressful as house hunting can be, the joy and excitement of finding the perfect home to start your married life is well worth the effort.
Before you and your spouse buy a home, you should have a thorough understanding your credit history, your financial standing, and your needs and wants for your home. By approaching this process as a team, you’ll lay the groundwork for success as new homeowners.