Should You Buy a Home Together? How to Know When Your Financial Picture and Life Timing Align

Buying a home is not only about how much money you can afford to spend on a house as a couple; it's also about whether or not your financial situation and the timing of your life are compatible.

At Aligre, we go beyond the question of "can you buy?" to help you in determining whether or not buying a home at this time is in line with your collective objectives and your overall financial preparedness.

Here is how to determine whether or not purchasing together is a good idea at this time.

Get Aligned on the Numbers

You should take an honest look at the financial situation of your household before you chat to a lender or search listings.

Here is a simple method for evaluating your overall financial picture:

1. Gross Monthly Income: Add up your total income from all sources before taxes and deductions.

2. Total Monthly Debt Payments: Add up all recurring monthly debt obligations. 

This includes:

• Rent or mortgage payment

• Credit card minimum payments

• Car loan payments

• Student loan payments

• Any other recurring loan or debt payments

Do not include non-debt expenses like utilities, groceries, or insurance premiums.

3. Calculate the DTI ratio: Use the following formula: 

DTI = (Total Monthly Debt Payments / divided by Total Gross Monthly Income) x 100

For example, if your total monthly debt payments are $6,000 and your gross monthly income is $15,000. DTI = (6000/15000)x100 = 40.

Based on the example, your DTI ratio is 40% 

Aligre Insight: Despite the fact that lenders may approve a debt-to-income ratio of up to 43 percent, this does not suggest that you should. Maintaining a percentage that is lower than 28–30% allows for flexibility for life, savings, and unforeseen expenses.

Soon, you will be able to run your numbers in the Aligre app to see your full financial picture, including taxes, maintenance, insurance, and interest.

Compare Credit Scores and Strategies

Your interest rate and, ultimately, the total amount that your loan will cost over the course of financing are both determined by your credit scores.

You can compare your free reports by retrieving them from AnnualCreditReport.com. When there are two names on the loan, the majority of lenders will utilize the score that is lower of the two.

You have options available to you in the event that one of your scores is much lower:

• Delay the purchase and concentrate on making improvements.

• Have the partner with a higher score take out the loan on their own (if their salary allows it).

Aligre Insight: Your credit score is not a reflection of your worth; rather, it is merely a component of your overall financial picture. The better you understand them, the more confident you’ll be when making decisions.

Define Your Down Payment Comfort Zone

The size of your down payment has an impact not only on whether or not you are approved for a loan, but also on the choices you have in the future.

• The typical ranges are 30% to 20% down

• Reserves are required by the majority of lenders; however, these reserves can contain retirement or investment accounts in addition to cash.

Ask Yourselves

• What is the maximum amount that we are willing to put down without compromising our safety net?

• If the interest rates were to change, would we still be satisfied with this payment after six months have passed?

Aligre Insight: The appropriate down payment is not only what a lender provides, but it is also what maintains the viability of your financial picture.

Align on Short- and Long-Term Goals

A shared commitment is made when two people make a purchase collectively; it is not only a financial milestone. Your timetables, your financial goals, and the priorities you have for your lifestyle should all be in alignment before you move on.

Pose the following question to one another:

• How long do we intend to remain in this house?

• Are we attempting to strike a balance between other ambitions, such as having children, changing careers, or traveling, that could have an impact on this decision?

• What role does this purchase play in the larger financial strategy that we have in place?

Aligre Insight: Your life should be supported by the home you choose, not the other way around. The decision is calm and not rushed when your goals and finances are in alignment with one another.

Is It a 'Good Time' to Buy?

This is a question that is asked by everyone, and the one we answer with a different question.

In Aligre's opinion, the better question is: "Will buying a home at this moment result in a favorable long-term outcome for both our finances and our personal lives?"

Here’s how to think about it:

1. Estimate your total cost of ownership throughout the course of ownership, including principal, interest, taxes, inspections, and insurance premiums.

2. Estimate potential appreciation and tax advantages.

3. Compare the two.

In the event that the cost of ownership is higher than the anticipated return, it may not be a prudent investment; yet, it may still be a reasonable choice from a lifestyle perspective.

Not every house will bring in money for you, but every decision you make that is well-informed can enhance your overall financial situation.

Don’t Forget Maintenance, Insurance & Taxes

Your 'mortgage payment' is not your total payment.

• Set aside between 1–3% of the value of your home each year for maintenance.

• Make an early request for quotations on homeowner's insurance.

• Estimate of property taxes based on the mill rates in the area.

Your total financial preparedness is influenced by all of these factors.

Prepare for What Comes Next

Surprises can occur even when a good plan is in place, such as unanticipated repairs, changes in personal circumstances, or adjustments in income. Making a cushion before you buy them assures that you will be able to deal with them without feeling stressed.

If you want to be prepared for the future, it is a good idea to put aside at least three to six months' worth of living expenses as an emergency cushion.

Additionally, you should consider how various "what if" circumstances, such as job changes, childcare costs, or inflation, could affect your preparation.

If you take the time to properly prepare, your financial picture will become more flexible rather than brittle.

Key Takeaways

The question "what can we afford?" should not be the starting point. Begin by asking, "What exactly fits into our financial picture?"

Before making a commitment, you should be aware of the actual cost of ownership.

Focus on clarity and alignment rather than being influenced by market noise or pressure.

Final Thought

When you buy a house together as a couple, it's not just about combining your resources; it's also about aligning your values and getting your timing right.

There is no need for an agent to help you determine what is feasible. Having a clear understanding of the reality about your finances is essential. We built Aligre for this purpose. Join the waitlist.