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Do You Need a Financial Advisor Before Buying a House?

financial advisor before buying a house

Buying a home is one of the biggest financial decisions that a person can make. Not only can it involve taking on a big mortgage, but the monthly expenses can also affect your budget and ability to save for your future. With so much at stake, does it make sense to work with a financial advisor before buying a house? Not only is it a good idea to seek professional guidance to buy a home, but a financial advisor can actually help you with so much more from your budget to preparing your finances for retirement.

Why You May Need a Financial Advisor Before Buying a House

While many people assume that a financial advisor only helps you choose investments, their skills go far beyond stocks and bonds. A financial advisor can help you with many of the most important financial decisions you make throughout your lifetime. This includes saving for retirement, planning for your child’s college tuition payments, navigating what insurance to buy and making large purchases like a home.

The financial advisor can advise you on how much of a home you can afford, which is something that many people struggle with. Just because you can qualify for a certain mortgage amount doesn’t mean you should take on that much debt. Your advisor can analyze your finances and help you make a plan to get the home of your dreams.

6 Ways a Financial Advisor Can Help You Buy a Home

financial advisor before buying a house

Beyond helping you understand what you can afford, a financial advisor can help you by creating specific plans of action in order to get your finances where you need them to be. Here are six ways a financial advisor can help you when buying a home that are actionable things you may need for your finances to be ready to buy your next home.

1. Creating a Budget

Buying a home is a big expense and the monthly mortgage payments can impact a household’s budget. Before buying a home, it is wise to create a budget based on your income, monthly obligations and spending decisions. A financial advisor serves as an impartial voice on your expenses to identify areas of your budget that you may be able to cut back on.

2. Saving a Down Payment

While reviewing your budget, a financial advisor can also help you figure out how to save for the down payment you need to not only afford the right house but to get the right monthly payment on your mortgage. The right down payment can drastically cut down your monthly mortgage payment and your advisor will help you determine that number and then create room in your budget to start saving towards it in the time frame you want.

3. Help You Pay Off Debt

To qualify for the best mortgage rates, aspiring homebuyers should boost their credit score as much as possible. A financial advisor can identify which debts to target first that will improve your score the most. This also frees up extra cash that you can use to save for your down payment or to pay your monthly mortgage bill. The right debt strategy can help you get out of debt but it also will help you boost your score to where you need it to be to qualify for the lower interest rate on your home loan.

4. Building an Emergency Fund

Having an emergency fund protects you in case of an unexpected expense or temporary reduction in income. When you’re a homeowner, it is even more critical that you have an emergency fund so that you can continue to make your mortgage payments when things break or go wrong financially. Financial advisors can suggest where to open an account, help you figure out how much to save and set up recurring deposits to build up your balance.

5. Protect Your Home With Life Insurance

Life insurance serves to protect your family financially against the loss of a loved one. The money helps to replace the lost income of someone that they depend on and pay off debts to reduce financial worry. Many families buy life insurance when they have a mortgage to ensure that the family won’t lose the home in case someone passes away. It can either help them pay off the house or at least make the payments while they sell it in an effort to take out the earned equity up to that point.

6. Saving for Retirement

When you buy a home, it is important not to lose sight of your other financial goals, like saving for retirement. A financial advisor helps you keep your eye on all of the goals that are important to you, not just focusing on buying a home. They’ll help you calculate a mortgage payment amount that meets your budget, while still allowing you to save for retirement and pay for your kids’ college and other financial goals you may have in mind.

The Bottom Line

financial advisor before buying a house

The home buying process can be tricky for many investors. While buying a home is an important goal, there are numerous other considerations that you should keep in mind. A financial advisor helps you to determine how much home you can buy without losing sight of your other goals. And they can pinpoint areas of your spending where you can cut back to afford your dream home while staying within your budget.

Tips for Buying a Home

  • Financial advisors advise all areas of your finances, not just where to invest. Working with an advisor can help you buy a home that meets your budget without sacrificing your other goals. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Determining how much home you can afford depends on many factors. These factors include your income, debt obligations and the cost of the monthly mortgage payment. Our mortgage calculator details your monthly payment based on the home price, down payment, interest rate, property taxes, and insurance. You can adjust these factors to understand how they affect your mortgage payment.

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