4 tips for young couples before buying a house

The need for housing makes owning a home a goal for many young couples. But not everyone knows how to achieve that goal.

Below is the sharing of Eric Roberge - a famous personal financial advisor for Forbes, Fortune, Wall Street Journal magazines. Eric Roberge and his wife also use this 4-step consideration strategy before investing in real estate.

Consider the appropriate down payment rate

Eric Roberge says that while he could have paid less than 20% down, he often opted for a larger down payment. Paying more also means you can lower your loan ratio, which reduces your monthly interest payments. The upside is that the value of your investment doesn’t increase quickly, but rather gradually over time.

Eric Roberge and his wife used the proceeds from the sale of their current home to put a 30% down payment on a larger home. But he says this isn't a good option for everyone.

In fact, there is no general formula for the bank loan rate to buy real estate, but most experts advise against borrowing an amount equivalent to 70-80% of the property value to buy.

The most important thing is to consider your ability to repay the debt. If your ability to repay the debt is good and your income is high, you can borrow the maximum. If your ability to repay the debt is low and you cannot withstand the pressure, you need to reduce the bank loan ratio.

Do not spend more than 20% of your income on buying a house

Next, consider the monthly and annual costs of owning a home. Eric Roberge typically advises his clients to keep these costs to no more than 20% of their annual gross income.

Annual real estate ownership costs include mortgage principal and interest, taxes, and average maintenance costs (assuming an average of 2% of the home's value).

If your household income is $250,000, your maximum annual housing budget should be $50,000. This principle can also be applied to renting.

20% is not a hard number. Eric Roberge likes this number because it helps ensure cash flow for savings and other important needs in life.

4 lời khuyên cho các cặp vợ chồng trẻ trước khi mua nhà - 1 — Financial experts advise not to spend more than 20% of your income on buying a house (Photo: Tien Tuan).

People tend to overspend. By deliberately starting low and planning for a limited percentage, you create a safety cushion for yourself. If this percentage is too high, it will put a lot of financial pressure on yourself.

When you limit your target to 20% of your income for real estate, increasing it to around 25% is still a reasonable number.

Don't rely too much on mortgages

Many people prefer to take out a mortgage to buy a home. However, Eric Roberge says this type of loan carries many risks to your financial future.

Floating interest rates are like a "double-edged sword". Lower interest rates are great, but when variable interest rates increase compared to the time of borrowing, the interest payable to the bank will increase.

Eric Roberge likes to focus on what he can control in his financial planning. An adjustable-rate mortgage gives him no control over future interest costs, so he often incorporates interest rate options or fixed-rate loans to limit his risk.

Willing to rent a house when interest rates are high

In the context of high interest rates, Eric Roberge advises customers not to buy a house at all costs but to consider renting. At this time, the cost of renting a house can be much lower than the cost of owning a house as mentioned above.

Renting a house now also gives you more time to calculate investment efficiency more carefully without having to make a large financial commitment.

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