The secret about Nashville is out. As transplants flock to ‘It City,’ fewer homes are available, and buying may feel out of reach. “Finding an affordable home can be difficult,” says Teresa Cepicky, a mortgage loan originator with FirstBank in Cool Springs and Columbia, TN.

According to the Nashville Chamber of Commerce’s 2018 Vital Signs report, the median cost of housing increased by 54 percent over the past 10 years, and locals are feeling the pinch. With folks spending more than 50 percent of their income on housing and transportation, affordability is a growing concern.

If you are arriving from California or the Northeast, owning a slice of Nashville may feel like a bargain. But for everyone else, making it work takes some planning. We sat down with Teresa to learn the key to affording a home in Middle Tennessee.

Buying a home in Nashville isn’t impossible. It just takes a little smart financial planning.

Home buying trends to watch for

Buying a home is an exciting time. You may do drive-bys of your dream neighborhood or research the local school system. Once you start browsing the MLS, you may notice how competitive it has become.

“It’s common for homes in Nashville to end up in a multiple offer situation,” Teresa points out. Buyers may fall in love with their third, fourth or fifth homes — only to be outbid by someone who saw it first.

Teresa suggests having your pre-approval letter ready. You should also be prepared to leave your office and make an offer within a few hours of the home being listed.

Interest rates are going up.

It’s normal to feel uneasy by the Fed’s interest rate hikes. The truth is, the economy, inflation and the Fed all play a role in where mortgage rates are heading. Still, experts don’t expect rates to stay low forever.

Teresa predicts folks may be eager to buy before rates increase. When interest rates go up, your pre-approved loan amount goes down. “If you wait too long, you will end up with less house,” she adds. This could also mean fewer available homes in your price range.

Stick to this housing rule of thumb.

It’s easy to get so lost in your vision of a new home, you don’t crunch the numbers. Teresa says this can be a mistake. “You don’t want your home to be a financial burden. It should be a haven in which to relax with your family and make good memories,” she adds.

She doesn’t recommend spending more than 30 or 40 percent of your gross income on your housing. Hint: That’s your monthly salary before taxes. While it may be possible to get approved for a payment at 50 percent of your income, it may create a financial burden.

“You don’t want your home to be a financial burden.”

It’s better to leave some wiggle room in case of financial emergencies. What if your partner was sick and couldn’t work? Or a job loss took several months to recover from? A drastic change in your household income could make it tough to afford your mortgage. Being conservative could help you avoid the worst case scenario of losing your home.

Teresa Cepicky is a mortgage loan originator with FirstBank in Cool Springs and Columbia, TN.

Plan for unexpected expenses.

When it’s time to run the numbers, you may consider buying a new refrigerator or washer and dryer. But there are many hidden costs you may not have planned for.

Imagine your hot water heater dies in the middle of the winter, or your HVAC stops working in the summer. These may need immediate attention, and neither are cheap to repair.

There are also weather disasters to prepare for, and not all damage is covered by your insurance. “In Tennessee, we get hit by storms and tornadoes. Even if your home isn’t hit directly, you never know what might happen,” Teresa says.

She recommends setting aside three mortgage payments as an emergency fund specifically for your home. If you keep this money in cash — separate from your regular checking account — you may avoid the temptation to spend it.

How to know you can really afford to buy a home

As your financial concerns grow, you may wonder if homeownership is an affordable option. Teresa says you should ask yourself how much you really feel comfortable paying every month.

Start by looking at how much you pay for rent and decide if the increase for a mortgage is realistic. How far are you willing to stretch? Teresa says a lot of folks already have their number in mind before the underwriting process begins. In her experience, the sweet spot is 35 to 40 percent of your income.

Spending every dollar to your name isn’t a good idea either, she warns. You should count on costly, unexpected expenses every year. Without a healthy emergency fund, you could end up in debt covering these expenses.

Budgeting for your mortgage

Taking on a mortgage usually means an increase in your monthly expenses. Even if your budget isn’t tight, adding a new bill to the mix can be stressful. To ease your anxiety, Teresa suggests avoiding extra debt.

“It may be tempting to apply for a credit card to pay for new furniture and appliances, but you shouldn’t do it,” she warns. A mountain of high-interest credit card debt will only make things more difficult.

When you shouldn’t buy a home

Buying a home is a big decision, and it’s easy to get overwhelmed by all the pros and cons. Experts have access to tools and data that may help answer your questions. For example, Teresa says rent increases by an average of 4 percent every year. The gap between your rent and potential mortgage payment may be smaller than you expect.

If your job expects you will move within two years, buying now may not make sense. It will be difficult to recoup your closing costs within that time frame. “The math usually shows that homeownership pays off within three years,” she says.

“The math usually shows that homeownership pays off within three years.”

The exception is if you can afford to keep the home and turn it into a rental. Teresa says this isn’t usually the case, though. Most folks need to sell their home to fund their next down payment.

Homeownership is within reach.

Despite the risks, Teresa urges nervous buyers to consider the upside. Homeownership is a great way to build your family’s long-term wealth, and she’s optimistic about Middle Tennessee’s growth potential.

If you are struggling to save enough for the down payment, the Tennessee Housing Development Agency has assistance programs that ease the burden.

Also, some lenders — like FirstBank — offer a Mortgage Credit Certificate (MCC) that may further close the gap through an $2,000 annual tax credit. Teresa says FirstBank requires you to take an online home buying course that lasts a couple of hours. “That’s a small price to pay for the benefit of a tax credit every year,” she adds.

Regardless of how you finance your dream home, a trusted partner can walk you through each step, making sure there are no hiccups along the way.

When you’re ready to take the next step in financing a new home purchase, the experts at FirstBank can help. Learn more at FirstBankOnline.com.

This article is sponsored by FirstBank.