Nashville’s housing market is unbelievably hot—and this is peak season for people to be selling and buying homes.
When you’re on the hunt for that perfect piece of property, don’t get caught up in the granite countertops and infinity-edge pool. Instead, consider your financial readiness to make a commitment to a home.
Buying a home is usually much more expensive than people think. Between realtor fees, closing costs, the down payment, property insurance, and the actual mortgage itself, this piece of property is going to be more of an investment than you think.
Let’s outline what you’ll need in order to safely purchase a home and still have financial security on the other side.
The Down Payment and PMI
Most mortgage companies will require you to have a down payment on your new home. This down payment is probably going to be required to be something along the lines of 20% of your home’s purchase price.
Do you have this amount of money saved? The average price of homes listed in Nashville right now is $339,000. This means you’ll need to have $67,800 ready to put down on your home. It goes without saying that not everyone has that amount of spendable cash in their bank account.
If you choose not to put 20% down on your home—or if you financially aren’t able to—your mortgage company will likely require you to have private mortgage insurance (PMI). This is a fee that you pay every month along with your mortgage to protect the mortgage company should you stop making the payments.
Budgeting for a Home
Have you budgeted how much you can afford for your mortgage in Nashville? After the down payment, closing costs, realtor, and moving fees, how much can you afford to pay every month on your salary?
Although the mortgage company will calculate how much they think you can afford, it’s always a good idea to have a number that you’re comfortable with in mind before you go and talk to that loan officer. In order to do this, it’s a good idea to sit down and figure out:
- Your monthly income
- Your monthly expenses (yes, include the dog food)
- How much debt you have and how much you pay on it every month
- How much home ownership is going to cost you every month (think HOA fees, repairs, and maintenance costs)
- Your total expense ratio as well as your housing expense ratio
You never want to end up with more house than you can comfortably afford. You need to have some money left over for emergencies (whether with your family or the actual house), investing in your retirement account, and any other unforeseen expenses.
What Happens If You Can’t Pay
If you can’t pay your mortgage, a process is set into place which varies depending on your state of residence. In Tennessee, when you miss the first payment, you’ll be notified after the grace period and perhaps given a fee to pay in addition to the amount back owed. After this, your credit score will be impacted.
If you still don’t pay after this, you’ll get a letter if you haven’t paid by the end of the month. This letter usually discusses foreclosure if you don’t pay the amount. You may have up to 90 days before the foreclosure process starts.
It’s always better to talk to your lender about your inability to pay rather than just waiting for action to happen against you. If you’re in heavy financial trouble and decide to consider bankruptcy, this could give you a chance to catch up on your mortgage payments and keep your home.
“When a bankruptcy case is filed, the law provides an ‘automatic stay’ as protection for the person filing,” explains Jon D. Long, attorney-at-law at Long, Burnett, and Johnson, PLLC. “This stay prevents actions by a creditor to collect on their debt or to take actions against property owned by the person.”
“It is this ‘automatic stay’ that forces a stop to foreclosure actions. Bankruptcy then provides a mechanism to allow the person to catch their mortgage up over an extended period of time. By using this “catch up”, at the end of the case, the person is again current on their mortgage and the threat of foreclosure has ended.”
Your home should be a place where you go to relax and enjoy life. By ensuring that you’re financially ready to buy a home, you can get the best piece of property that you can afford with your income and savings. When you’re ready to buy that perfect home in Nashville, consider how ready you are money wise. It always pays to be smart with your money!Need a hotel while in Nashville?
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