Financial advisor details what to consider when purchasing a new home in Alabama

HUNTSVILLE, Ala. (WAFF) - With mortgage interest rates and home prices still near multi-year highs, those looking to buy a home face a challenging environment.

Jay McGowan with The Welch Group has a few things you need to consider when making a new home purchase. The financial advisor explains it is normal for first-time buyers to have cold feet in this current economic market, but one thing is key.

“This kind of goes without saying, but limit your monthly mortgage payments,” McGowan said.

One way to do that is to put down an adequate down payment.

“Typically it’s 20%, and that would get you to the place where you avoid private mortgage insurance or PMI,” McGowan said. The wealth management expert explains doing this can save you hundreds of dollars a month.

Another piece of advice McGowan gives to new buyers is to avoid feeling like you are financially stretched. He says the advice he typically gives his clients is, “Don’t spend more than 25% of your gross income on mortgage payments.”

That leads right into McGowan’s next point which is to plan for future expenses since the mortgage is not the only thing you are on the hook for.

“When you’re a homeowner, there’s general maintenance. There are large repairs, HVAC units go out, roofs go out, or you need to repair a roof, plumbing issues, things like that. Those things can be very costly,” McGowan said.

He explains unforeseen costs in the tens of thousands of dollars in some years are not out of the question, so make sure you are prepared with an extra cushion of capital when you are in the market for a new home.

Finally, McGowan explains it is important not to overextend yourself financially just to get into your dream home.

“You don’t want to be house-poor,” McGowan said. “Don’t sacrifice your savings and your long-term goals. As life changes, things get more expensive. You don’t want to be right up on the margin when you buy that first house because things will change. Life does get more expensive.”

For more ways to stay financially savvy, visit The Welch Group’s website.

Click Here to Subscribe on YouTube: Watch the latest WAFF 48 news, sports & weather videos on our YouTube channel!