Buying a house is rather challenging, and most people leave their first homes far sooner than before. This is because they fail to buy the right home at first, so they get a second one. If you want the perfect first home to pass down to the next generation, you need to be smart about your decision.
But how do you ensure the home you buy is “the one?” That’s simple: you are thorough. Here are a few tips to ensure the property you buy is one that you can truly enjoy.
1. Check Credit – And Fix If Necessary
The amount of mortgage that you get relies entirely on your credit score. If that number is too low, not only do you risk getting a smaller amount than you need, but you also risk being turned down.
Once buying your first home crosses your mind, you should start working on your credit score. Pay your bills on time and try to get rid of outstanding debt. Now is not a good time to get another line of credit or a personal loan.
2. Be Sure You Can Commit To A Mortgage
If you want to buy a home, you must ensure you are ready. When you take out a mortgage, you must commit for the next 15-30 years of your life. Ensure that you have a stable job and are ready to commit to the property for at least five years.
If you are not entirely certain of it, you may want to put off buying for the time being. Just keep on renting. When you commit, ensure you have the monthly funds necessary to cover your mortgage.
3. Don’t Skip The Pre-Approval
At first, you might want to jump straight into house hunting and use Ofirio charts to get some useful market insights. Chances are that you will find the perfect home based on a budget that you think you will get. That said, even if a lender advertises you can borrow up to a certain sum, it doesn’t mean you will get it.
It’s best to be pre-approved for a loan first. It doesn’t necessarily tie you down, even if you change your mind about buying the house. Pre-approval means that you qualify, not that you applied for the money – so you can still back out if needed.
Once you get pre-approved, you know what sum you will receive and know for sure that you will receive the money. Then, you can start searching for homes without any financial surprises.
4. Create An Emergency Fund
Before you buy a home for the first time, you must be prepared for anything. Remember that you risk losing the house if you do not pay the mortgage on time. Even if you paid for half of it, they still have the right to close in on you.
This is why you may want to create an emergency fund that can cover at least three months’ worth of mortgage payments. This way, even if you have to change your job, this won’t affect you too much. Make sure your emergency account covers basic expenses because you may never know what disaster can come your way.
5. Save For Down Payment
Down payments are necessary when you are buying your first home. Most mortgages will cover this amount, which is 20% of the total home value. That being said, if the first home of your dreams is slightly more expensive, the loan may not be able to cover the entire amount, and you need to cover part of it as well.
Down payment savings do not necessarily have to go to the seller. For instance, you may use that money as collateral for a secured loan. This may help you get a lower interest rate and a higher mortgage amount, which can help you get an even better house.
6. Keep Closing Costs In Mind
The down payment will be one of many costs you need to worry about. Before you get that home under your name, you must also pay the closing costs. Depending on the home and the seller, these fees can be pretty hefty.
Expect to cover various expenses, such as attorney, appraisal, or escrow fees. You also have to pay homeowner and title insurance and property taxes. On average, the closing costs will be about 2-5% of the home’s total value.
The Bottom Line
Buying your first home can be simple if you are informed and prepared. Make sure you calculate potential expenses and do the proper research beforehand. This way, you can prevent surprises that compromise your home-hunting process.