Buying a home for the first time is something many people aspire to, especially if you’re looking to start a family. However, whether you are looking for a home to start a family or a simple one-bedroom apartment for yourself, there are many things you need to consider before you buy your first property. Here are some of the top tips to help you prepare your finances and yourself for your new home.
Decide How Much You Can Afford
One large consideration you have to make is how much you think you can afford towards your new home. It’s important that you assess your financial ability and be realistic as to the amount you can spend towards your house. Though you might think of your house as an investment in the long term, it’s important that you don’t overstretch yourself thinking that you can then recoup the money later. Though houses do generally increase in price, sometimes you could find yourself financially worse off.
You will want to keep your housing payment under 30 percent of your gross monthly income. This has to be from an income that you’ll be getting every month, not including overtime or one-off payments.
Prepare Your Finances
If you don’t know already, getting a mortgage requires you to have a good credit score. This means it’s a good time for you to make sure you don’t have any outstanding loans, and your credit score itself is in good order. One of the things you should regularly be doing anyway is checking your credit score to make sure there are no errors. Check out this page for more information on how to do this.
If you have any loans that are currently outstanding, it’s a good idea to clear these before you decide to get a mortgage. Mortgage payments are going to be a substantial amount, and you want to have as much spare cash as possible available to put towards this payment. You should also be aware that if you are considering buying a home with a spouse or a co-buyer, the lender may consider both your credit scores in the application.
Save Some Money
As well as ensuring you have a good credit score and financial stability, you’ll also need to think about saving money to secure your home in the first place. One of the biggest amounts you will need to save for is your deposit or down payment. Typically, this can be between three and a half and 20 percent of the purchase price, though this can vary. This part of buying a new home can take the longest time, especially if you only have a small amount to contribute each month to your savings.
Of course, you can find ways to generate more money for yourself such as taking on a second job or doing overtime work. You should, however, resist the temptation to invest this money especially in something like stocks and shares. Although there can be safe investments, you ideally want to choose a low-risk investment if possible.
Renting vs. Buying
There is a lot of importance and pressure on people to buy their homes, though this isn’t the only way you can have a roof over your head. You can, of course, consider renting privately and many couples do this initially before they can save up to buy their first home. There are pros and cons to both renting and buying.
If you buy, you have something that you are investing in for the future, whereas with renting you are giving money away each month and never owning a home yourself. However, with renting you do have the security of knowing that if anything goes wrong with the house, it will be repaired by your landlord.
Consider the Mortgage You Want
Deciding which mortgage is best for you can be a very difficult process. This is because there are many different types from fixed rates to adjustable rates. Most buyers tend to go for fixed-rate mortgages, and indeed, a 30-year fixed rate mortgage is one of the most common. It is important, however, that you look at all the options open to you and do any mortgage calculators to see what the different rates mean for you and your monthly payment.
Even though buying your first home can be a long and difficult process, in the end, getting those keys for the first time and your very own home can make all the effort worthwhile.
Photo by Hauke Irrgang
Milo Senalle
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