People buy a home as a sign of independence. Being one of the major decisions in every person’s life, doing it the first time can be both exciting and overwhelming, therefore homebuyers should be properly informed and be educated about the processes before embarking on their real estate journey.
According to a study, almost 60% of first-time homebuyers felt they were not well-prepared for the homebuying process. This proves that majority is not really confident for some reason. Worse, less informed or misinformed individuals make impulsive decision that could hurt their financial goals. Doing it the right way, the first-time, is a big leap to take so you buy a home that you love and that doesn’t hurt your future money goals.
For your first home to be a blessing not a burden, take note of the following tips for first-time homebuyers.
Make sure to be debt-free before buying a house.
It’s true that even if your monthly house payment is similar or lower than your current monthly rent amount; owning a home is still much more expensive than renting. It’s because when you own a home, you’re the one responsible for all the maintenance and upkeep costs, which renters are not responsible of. Making sure you’re debt-free before buying a home makes a big difference. Also, it is best if you have an emergency fund good for three to six months, apart from having a zero debt.
Choose a house you can afford.
Oftentimes, buyers get too emotionally attached to their dream house, and that is no good for first time buyers. To avoid this, have a check of your monthly budget first and determine how much house you can afford. An online Mortgage Qualification Calculator will help you determine your capacity to pay the mortgage on time without sacrificing your financial goals. The result will show you the minimum required salary for the home you want to buy. If your salary does not meet the result, then you have to adjust your choice to a lower amount of home. Keep in mind that as a rule, your monthly housing costs will not exceed 25% of your monthly take-home pay.
Save for a down payment.
Down payment is a huge amount of money to be deducted from your finances. If you can’t pay the house in full cash or you can’t save up to pay cash for the total price of a house, then you have to save for a down payment of at least 20% of the total contract price. This will prevent you – the buyer – from paying for the private mortgage insurance (PMI) which protects the mortgage company in case you can no longer make your payments and end up in foreclosure.
Get preapproved for a loan.
Once you have enough cash saved for your home’s down payment, you’re now ready to handle the other 80% by talking to a mortgage lender. Before doing so, get pre-qualified for a loan and take the extra time to get a preapproval letter to assure you, the seller and the real estate agent that you have the ability to complete the purchase of any home based on the lender’s guidelines.
You don’t want to end messing things up for your first home and doing it right the first time will surely take the weight off your shoulders.