Your house is the place where you spend most of your time. The house is not just a living place or shelter, it is your sanctuary. There are several things that you should know if you are planning to buy your first house. To live comfortably in your new house, you should synchronize your dwelling needs with your finances.
This is a must-read guide for first time home buyers.
When buying a house, you will need money upfront. Even if you are earning a hefty amount every month, you should save enough to pay the down payment. The requirement of the down payment will depend on the type of mortgage you choose and the lending agency. Although, some creditors allow first-time buyers to pay as little as 3% in down payment.
You will also be required to pay fees and other expenses when finalizing the mortgage. The costs range from 2-5% of the total debt you will take. Afterward, you will also be spending money on furniture and necessities.
Setting money aside for upgrades, furnishings, moving in costs and immediate dwelling maintenance is a smart way to plan everything. You don’t want to wait for a couple of months to buy a microwave and lounge sofa when you move in because you spent all you had, right?
For buying a house, set your saving goals, and start saving. The earlier you start saving, the better you will be able to prepare for buying the house and making it a home.
2. Mortgage the Right House
If a mortgage allows you a debt limit of $500,000, it does not mean you should buy a $500,000 house. Keep your dwelling needs in mind. If you are a couple living in an apartment that has one bedroom, one bathroom, living room, and kitchen, you don’t need a 4-bedroom house. Unless you are thinking of starting a family or sharing the house or putting a part of its rent, don’t buy a huge house.
Your house should be the right size and have enough space for you. Even if you can pay the installments for a large house easily, buy what you need. Invest your money in other ventures, get a house that you can maintain.
3. Credit Score
To qualify for a mortgage, improve your credit score. Your credit score affects the debt limit, interest rate, and the trust level of the creditor. If your credit score has been falling lately, it is better to start working on the credit score.
To keep a good credit card score, pay back the debt in time, don’t skip the payments, and diversify the ways you have accumulated debt.
For maintaining a good credit score, it is advisable to keep the current credit cards open. The more debt you use and create a history of successful payments will help bring your credit score up.
4. Compare mortgage rates and fees
Do your homework when buying a house. It is recommended by the Consumer Financial Protection Bureau to compare the costs, interest rates, and origination fees of multiple lenders before landing a deal with one.
Some lenders allow the buyers to purchase the asset using discount points. The opportunity of discount points can lower the interest rate and fees that you will be required to pay upfront. As a borrower, use a discount point calculator to calculate how the discount can affect your first house purchase.
5. Pre-approval Letter
A pre-approval letter will help you in your search for the right house. With the pre-approval letter, you appear as a serious buyer, the real estate agents and homeowners will, therefore, entertain your visits better. The agent will be giving you more time and will plan extra visits with you as compared to other buyers who may or may not purchase at the end.
To get a pre-approval letter, apply for a house mortgage. Once your credit score is studied, fees, charges down payment, and interest rate is calculated, you can avail the pre-approval letter.
Do not get a pre-approval letter way before the purchase because it will affect your credit score if you delay the purchase. The ideal period for using the pre-approval letter for home shopping is 30 days. Do not apply for pre-approval letters from multiple lenders and your credit score to maintain it.
6. Stick to the Budget
The decision of a home purchase is a very tricky one. It may take in all your savings when you will be looking for the best hose. To stick to the budget, look for houses that are below your price range so that you will leave room for additional expenses and in case your attention lands on a house that needs repair.
You should be able to comfortably afford your house. To feel unpressurized when beating down another buyer’s offer for buying a house, keep some money aside. You don’t want to get empty-handed after buying your first house, so avoid the financial stress down the road and effectively plan a budget. The hardest part-stick to the budget!
7. Get a Home Inspection
When purchasing the house, your budget must be tight but this is the one thing that you should happily spend on. A home inspection is a complete assessment of the house’s structure and mechanical system. A professional can help you make an informed decision and bid the right price for a house. Take your inspector to look at every part of the house, the roof, the chimney, and every small and negligible place.
The other problems that may exist in a house that are ignored in a standard inspection include radon, mold, or pests. Do an inspection yourself or ask your friends who have experience in buying a house to accompany you on visits.
8. Negotiate with the seller
To save money and make your first house buying decision the best decision-Negotiate. Talk to the homeowner and figure out if the person will be willing to sell the house at cheaper. If a house is in great demand already, you might not be able to negotiate the price but if there are fewer buyers, you can expect the seller to be flexible.
Ask the seller if they will be willing to pay for repairs, maintenance or wall painting, etc. This can help you save money for furnishings and décor. Understand the local market by getting more educated. Sit with your real estate agent and strategize ahead.
9. Get Home Insurance
Before closing the deal, the lender will require to purchase the insurance. Home insurance should be adequate to cover the cost of repair and replace your home and belongings in case of damage by an incident that is covered in the policy. You will also be able to receive liability insurance if you are held responsible for the injury or accident. Make sure to purchase enough home insurance that covers the cost of rebuilding the home all over again if it is destroyed.
Enjoy the process and explore as many options as much as you can. Make informed decisions by talking to family or your trusted mortgage lenders at 1st Financial Inc. Do not make haste or select the first option you see, take your time, and do your homework. You are planning to make the house a home, make sure it suits your needs and can be adjusted to become your sanctuary. Happy Buying! If you have any questions, feel free to contact us today!