Why You Need to Know Your Retirement Balance When Buying a Home

When you’re house hunting there’s a lot to consider: location, mortgage rates, monthly payments, down payment, etc. But one often overlooked piece of the puzzle is your retirement balance. Your retirement balance is a key part of the equation not just for retirement but for big purchases like a home. Here’s why knowing your retirement balance is a game changer when buying a home.

1. Big Picture

Your retirement balance is the foundation of your financial health. Knowing how much you have saved helps you gauge your overall financial stability. A healthy retirement fund means you’ve built a solid foundation for the future, and you can be more comfortable making big purchases like a home.

If your retirement savings are on target, you may be more willing to take on a mortgage. If your balance is lower than you thought, you may reconsider how much house you can afford without putting your long-term financial security at risk.

2. Down Payment Options

Retirement accounts like 401(k)s or IRAs can be used to fund a down payment but this shouldn’t be done lightly. Early withdrawals come with penalties and taxes, so you’ll get less than you think. Knowing your balance helps you decide if using retirement funds for a down payment is an option or if you should save specifically for the home purchase.

3. Don’t Overextend

Buying a home, you can’t afford will leave you financially strained and make it harder to contribute to your retirement savings. By knowing your retirement balance you can determine a mortgage amount that aligns with your bigger financial goals. So your home purchase doesn’t blow up your retirement plans.

4. Using Retirement Accounts in Planning

Your retirement balance can be a safety net. While the purpose of these funds is to provide income in retirement, knowing you have a fully funded account can give you peace of mind as you go through the home buying process. It can also impact your debt-to-income (DTI) ratio which is a key factor that lenders look at when approving your mortgage.

5. Balancing Present and Future

A home is a long-term investment just like retirement savings. The key is to balance these two. Knowing your retirement balance lets you plan for the future while making informed decisions on how much you can spend on a home today. So, your dream of homeownership doesn’t come at the cost of your retirement security.

6. Get Started

If you don’t know your retirement balance start by reviewing your statements or talking to a financial advisor. Once you have a clear picture of your savings consider how they align with your home buying goals. If you need help determining how much home, you can afford or what financing options are best for you working with a knowledgeable mortgage professional can make all the difference.

Conclusion

Buying a home is one of the biggest financial decisions you’ll make in your life and knowing your retirement balance is part of the equation. By taking the time to think through your savings you can make decisions that support both your present and future goals.

I’m a mortgage pro, and I’ll walk you through the home buying process and keep your financials top of mind. If you have questions about how your retirement savings affects your mortgage options reach out, I’d love to help!

Ready to get started? Contact Joonago Mortgage Services today!