Buying your first home is an exciting and overwhelming undertaking. Most new homeowners end up making decisions out of emotions. If you are about to buy your first home, it is essential to be careful and seek professional help to ensure you choose the right house. Here are the best options for buying your first home.
Pay off All Debts
Consider paying off all debts before buying a home. It is expensive to own a house because you will be responsible for the renovation and upkeep. Therefore, you need to be free from debts and have enough to renovate and maintain your home.
Save Enough Money
It is essential to save enough money before buying a house, even if you are going to take a mortgage. This is because you will typically need a down payment to get a home loan. The down payment can range from 5% to 20% of the total cost of the home. Moreover, saving money helps you maintain or renovate your new house after sealing the deal. It is advisable to have enough money to take care of regular expenses for three to six months after you have moved in.
It is unwise to buy a new home without an emergency fund. Huge expenses might hit you at first because moving in needs money. You need cash for relocation, shopping, decorations, and home improvements. Also, you need to start paying your mortgage. Most first time homeowners face financial constraints that they end up moving out after two months because they could not maintain the home. You can avoid this problem by saving enough money to keep you going for about six months.
Buy a Cheap Home and Upgrade It
Most people buying homes for the first time make the mistake of choosing the most expensive home. They also try to upgrade it from their pockets. This is stressful, especially if you had not saved enough. Fortunately, you can take a loan to update the floor, ceiling, kitchen, bathroom, and outdoor space. Pool loan companies have significantly helped homeowners build a beautiful swimming pool at their backyards. You can buy a cheap house and choose this financing option to improve it.
Compare Mortgage Rates
Since you are looking for an affordable home, it is important to compare mortgage rates. Many lenders offer mortgage loans, and you need to choose one that has favorable terms. According to the Consumer Financial Protection Bureau, analyzing mortgage rates of at least three lenders can help you save more than $3,500 over the first five years of your mortgage. When comparing, ask the lenders if they would allow you to buy discount points, which means you pay interest immediately to secure a lower interest on your mortgage. Before you settle for a particular lender, you need to conduct thorough research and evaluate your options.
Choose a House You Can Afford
First time homeowners often make unrealistic decisions based on emotions. This means that you may end up choosing a house you cannot afford because it has all the features you are looking for in a home. The house should not be more than 25% of your income. Also, evaluate the mortgage payment and interest rates to ensure you can manage the monthly charges. Don't forget that property taxes and home insurance are significant factors that determine the amount you pay monthly. With the help of your real estate agent, find a house that matches your level of income.
Get a Pre-approval Letter
Getting a pre-approval letter from your lender is essential. The letter allows the lender to examine your finances and confirm that they will lend you money under specific terms. An approval letter shows a home seller that you are serious. It guarantees that the lender is ready and willing to approve your mortgage. The letter is vital if other potential buyers are competing for the same home.
It feels good to own a home for the first time. However, you need to evaluate your options first to ensure you purchase a home that matches your financial capability.
Publish Date: March 24, 2020 2:30 AM