Buying a house is one of life’s major milestones. That’s why it’s important to prepare for the process to ensure you are getting the best deal. Buying a home is just as exciting as it is challenging, especially for first-time buyers. As with any major decision, being well-informed is important during the home buying process. Here are a few must-do’s before buying a home to get you started:
Buying a house, for most people, means getting a mortgage. The amount of mortgage you can qualify for is greatly influenced by your credit score, which thankfully, isn’t permanent. So, before you even consider buying a home, work towards improving your credit score. This includes paying down your current debts and fixing any mistakes on your credit reports. In addition, avoid applying for a new loan at least a year before applying for a mortgage.
‘Live within your means’ is a popular saying that should be implemented during the home buying process. When it comes to buying a home, there are several ways to ascertain how far you can stretch to. Financial advisers recommend that your mortgage payment should not exceed 25% to 30% of your monthly income. However, this will differ from person to person depending on their financial responsibilities.
There are several hidden costs of buying a home that goes above and beyond mortgage payments, including down payment and closing costs. On average, you’ll need between 3-20% of the mortgage for down payment. On the other hand, closing costs vary by state, market, loan type, and transaction. Your lender should be able to give you an estimate of these costs beforehand to allow you to factor them into your budget early on.
A mortgage pre-approval helps you know what you can afford. Plus, sellers prefer buyers who’ve been pre-approved as it means they should be able to get a loan so long as nothing changes about their credit score or financial situation. Fast, easy and free to use mortgage brokers like Habito.com can help you determine how much you can afford.
Building a strong savings account is a great way to show lenders that have significant liquid assets. That money will cater for down payment and closing costs. In addition, no matter how perfect a house may be, it’s bound to require certain changes, including home renovations or improvements. Ensure that your savings can also cater for these unexpected expenses. A great way to start is by saving approximately 20% of your home’s value for down payment, another 3% for closing costs, and another 2.5 to 3% for upkeep and repairs.
Between comparing lenders, loan terms, mortgage rates, and generally trying to find a great deal within your budget, the home buying process can be quite intense. What use is it to win the bidding process only to end up with a house you don’t like. Owning a house for a short while can be quite costly, so, before signing anything, ensure you’re excited to live in the house you are buying and that it fits your needs and those of your family.