Of course, congratulations are definitely in order; however, your bank account is going to apply for witness protection any minute now. Buying a house and a baby on a mortgage is not something to be done by a novice. You find yourself in what I call “Double Whammy” area, where all your money goes into diapers and down payments. Do not get upset now; as there is absolutely feasible way to solve this riddle without sacrificing one of your kidneys.
First of all, you need to come to terms with the elephant in the nursery. You have to work out a budget that considers both closing costs and expenses associated with bringing the little creature into your life. Your finances are like Tetris; you need to rotate the blocks in order to fit them perfectly. Failing to calculate the daycare costs when choosing the three-bedroom colonial is a typical rookie mistake that ends with tears.
Lenders are interested in your debt-to-income ratio, and babies tend to make it worse practically overnight. Should you be planning to buy a house, you better keep your baby fund money in the High Yield Savings Accounts offered by Marcus or Ally. Do not use this money to buy adorable onesies. Having a huge reserve account is what the lenders like as it means that you can cope with sudden roof leaks and diaper changes at once.
It would be wise to evaluate the cost of living in your preferred neighborhoods right away. This lovely suburb can prove quite expensive when it comes to property taxes that may cost more than a semester in a private college. Do this right away as soon as possible as the ratings of school districts matter as well. Purchasing the house itself is not a problem; the issue is how you can afford to live there with a kid.
The following step which is usually completely neglected. You should buy a life insurance policy before your baby is born and before signing the closing documents. Term life when you are healthy and young is very inexpensive and it is your way of protecting your precious mortgage from any unpredictable accidents. It is not an exciting step in your planning process, but neither is struggling with payments while having a toddler on your hands.
Lastly, do not forget to automate your saving. Set a recurring transfer right after receiving your pay check to your brokerage or savings account. You are too tired to make proper decisions when you wake up because of the kid at 3 AM. Let the system you have set up deal with your finances.