Purchasing a home is one of the most significant financial decisions you’ll make, and it’s a journey that requires careful planning and prayerful consideration. At Greenway Financial Planning, we believe that aligning your financial decisions with biblical principles of stewardship can lead to peace and confidence. As Proverbs 24:3-4 reminds us, “By wisdom a house is built, and through understanding it is established; through knowledge its rooms are filled with rare and beautiful treasures.” Here, we outline key issues to consider when buying a home in 2025, ensuring your decision honors both your budget and your faith.
Assessing Your Cash Flow: Can You Afford the Full Cost of Homeownership?
Before signing a mortgage, take time to evaluate the total cost of owning a home. Beyond the monthly mortgage payment, consider:
- Ongoing Expenses: Property taxes, homeowners insurance, private mortgage insurance (PMI) if your down payment is less than 20%, and utilities.
- Maintenance Costs: Budget for repairs like a new roof or HVAC system.
- Lifestyle Impacts: Factor in commuting costs, childcare, or private education if applicable.
If you plan to renovate or make improvements, estimate those costs and their impact on your financial goals, such as saving for retirement. For those living on a single income—perhaps to allow one spouse to stay home with children—ensure the home’s carrying costs fit your budget. As Luke 14:28 advises, “Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?” A thorough cash flow analysis helps you avoid overextending yourself.
Action Step: If you’re planning to stay in the home for five years or less, conduct a break-even analysis to determine if renting might be more cost-effective than buying.
Choosing the Right Mortgage: Balancing Terms and Eligibility
Selecting a mortgage is a critical step that requires weighing various options:
- Mortgage Types: Compare fixed-rate versus variable-rate loans, and explore FHA loans versus conventional loans. If you’re 62 or older, a reverse mortgage might be an option in certain cases.
- Special Programs: Veterans may qualify for VA Home Loans, which often offer lower interest rates.
- Lender Requirements: Ensure your monthly mortgage payment (including principal, interest, taxes, and insurance) is less than 28% of your gross monthly income. Total debt payments, including the mortgage, should ideally be below 36% of your income.
Your credit score plays a significant role in securing favorable terms. A low score may lead to higher interest rates or loan denial. Review your credit report for inaccuracies, pay bills on time, and avoid opening or closing credit accounts before applying for a loan. Ecclesiastes 5:5 warns, “It is better not to make a vow than to make one and not fulfill it.” Similarly, committing to a mortgage you can’t sustain can lead to financial strain.
Action Step: Consult with your lender to understand how large purchases or credit changes might affect your loan application.
Navigating Down Payments and Closing Costs: Planning for Upfront Expenses
The down payment and closing costs can be substantial hurdles. Consider:
- Down Payment Size: A down payment of less than 20% on a conventional loan may require PMI, increasing your monthly costs. Ensure your emergency fund remains adequate after the down payment.
- Funding Options: Withdrawals from a Roth IRA (up to $10,000 of earnings for first-time buyers, tax- and penalty-free if the account is at least five years old) or a traditional IRA (up to $10,000 penalty-free, though taxes apply) can help. Some 401(k) plans allow loans, and down payment assistance programs may be available.
- Closing Costs: Budget for appraisals, loan origination fees, and attorney fees.
Proverbs 13:11 teaches, “Dishonest money dwindles away, but whoever gathers money little by little makes it grow.” Saving diligently for a down payment reflects wise stewardship and prepares you for the responsibilities of homeownership.
Action Step: Review your liquidity and explore funding options with a financial planner to avoid depleting your savings.
Tax and Estate Planning: Maximizing Benefits and Protecting Your Legacy
Homeownership comes with tax and estate planning considerations:
- Tax Deductions: Property and state income taxes are deductible up to $10,000 annually. Mortgage interest is deductible only on debt up to $750,000. If you use part of your home exclusively for business, you may qualify for home office deductions.
- Cost Basis: Track home improvement costs, as they can increase your cost basis and reduce capital gains taxes when selling.
- Ownership Structure: Consider whether the home should be owned by one spouse or a trust to avoid probate, especially for out-of-state properties. Some states allow Transfer on Death (TOD) deeds.
Additionally, review your estate plan to ensure your new home is accounted for. As 1 Timothy 5:8 reminds us, “Anyone who does not provide for their relatives, and especially for their own household, has denied the faith and is worse than an unbeliever.” Proper planning ensures your family’s future security.
Action Step: Consult a tax professional and estate planner to optimize deductions and update your estate plan.
Other Considerations: Insurance, Second Homes, and State Benefits
Don’t overlook these additional factors:
- Insurance Needs: A new mortgage may increase your need for life insurance. Review your home and auto policies, and consider bundling for savings. An umbrella policy may provide extra liability protection.
- Second Homes or Rentals: If the property is a second home or rental, decide on titling (e.g., using an LLC) and assess potential liabilities.
- State-Specific Benefits: Some states offer tax benefits for homeowners, and relocation assistance may be available if the purchase is due to a job change.
Action Step: Work with an insurance agent and financial planner to review coverage and explore state-specific opportunities.
Conclusion: Building a Home on a Foundation of Faith and Wisdom
Buying a home is more than a financial transaction—it’s an opportunity to steward God’s resources wisely. By carefully evaluating cash flow, mortgage options, down payments, taxes, and other factors, you can make a decision that aligns with your goals and values. At Greenway Financial Planning, we’re here to guide you through this process with personalized advice rooted in integrity.
As Matthew 7:24-25 encourages, “Everyone who hears these words of mine and puts them into practice is like a wise man who built his house on the rock.” Let’s build your financial future on a solid foundation. Contact us at luke@greenwayfinancialplanning.com or 678-341-0186 to discuss your homebuying journey.