The thought of buying a home can be extremely exciting, especially for those who are buying their first home. But because home ownership entails commitment and financial responsibility, it’s something that shouldn’t be rushed. Making an impulsive decision about purchasing your first home can hurt your pocket now as well as your future financial goals. Like any big project, buying a home should include carefully laying out and attending to all of the details from start to finish to ensure a smooth process and a successful outcome. If you’re planning to start your journey toward home ownership, you’re on the right page! Here are some home-buying tips you might find handy:
Start building your savings early
Unless you’re earning enough money to allow you to purchase a home upfront with cash, one of the first steps to take when purchasing a home is saving up for the down payment. The amount required for a down payment will vary based on the lender and the type of mortgage. Your credit score can also significantly impact the amount of down payment you’ll be required to pay. In the meantime, it is ideal to save up for a down payment of at least 20 percent.
Some down payment amounts in the single digits may seem very tempting. However, they might end up costing you more in the long run. These types of “deals” may entice you with lower monthly payments that require a longer payment term such as 30 years. It may appear more affordable at first, but it will cost you more money overall when you calculate the total cost, including interest.
Get rid of any debt
Owning a home is, needless to say, expensive. Even if the monthly payments end up being less than your current rent, the maintenance and upkeep costs of your own home will all have to be covered by you. Therefore, as soon as the thought of buying a home enters your mind, be sure that you work on reducing, or even better yet, getting rid of your existing debts. It’s crucial that you make sure these debts don’t get in the way of your future mortgage payments.
Build an emergency fund
You’ll enjoy more peace of mind if you can live stress-free in your new home without having to worry about finances because you’ve built up enough funds in case of emergency. If possible, try to build an emergency fund that can cover three to six months’ worth of expenses. This will help ensure that you can pay for any unexpected expenses that might suddenly come your way. It is definitely easier said than done, but it will be worth the peace of mind down the line.
Figure out how much you can afford
Before you go shopping for your dream house, it’s imperative that you carefully determine exactly how much you can afford. Review your monthly budget thoroughly, and determine how much room can be dedicated to your monthly mortgage payments. Also, revisit your existing debts, your credit score, and amount needed for a down payment. When you calculate your budget for a home purchase, be sure you’re also leaving enough room for other expenses such as insurance and taxes.
Get pre-approved for a loan
Now that you’re confident about paying the 20% down payment, and you have adequate savings and emergency funds, the next step is getting pre-approved for a loan. Applying for a loan pre-approval is one way to prove to a lender that you’re serious about your home purchase. Be ready to present them with any pertinent financial documents they require, such as proof of income and taxes.
Explore options within your price range
Now here comes the most exciting part – shopping for your new home! You have finally determined how much money you can afford, so now it’s time to find a home within your price range. Do some online research and talk to your real estate agent. Present them with what you’re looking for. Don’t overlook tiny details, and don’t rush into any decision. Take as much time as you need to choose the best home for you. Remember, this is going to be your home from this point on. You don’t get to buy a new home every day. So be sure to make a decision that you won’t regret.
Are you looking forward to buying your first home? If so, use these home buying tips to help you navigate the process with ease!
For all your mortgage needs, feel free to contact Calcite Credit Union.