Buying your first home is a big decision that involves a major financial commitment, so you want to make sure you approach it smartly. Here are some important tips to help you make this decision.
1. MAKE SURE HOMEOWNERSHIP IS RIGHT FOR YOU
The purchase of a home brings a lot of responsibilities that will demand considerable time and money. Homeownership involves home repairs, improvements, furniture purchases, property upkeep and the need for a range of tools that, as a renter, you never needed before. Are you financially and mentally prepared?
2. UNDERSTAND WHAT YOU WANT
Narrow down what you want out of a home (e.g., condo vs. single-family home), where you want to live and how much you can afford. This will help focus your search and make the most efficient use of your time. Do this together with your spouse or partner so you are on the same page!
3. DETERMINE WHAT YOU CAN AFFORD
Use a reputable mortgage calculator to determine monthly payments. You’ll need to know how much of a down payment you can afford. Don’t forget to include property taxes, homeowner’s insurance and other bills, such as utilities, repairs, appliances, etc. when deciding how much you can afford. Your monthly mortgage should not exceed more than 15% of your monthly gross income.
4. CHECK YOUR CREDIT SCORE
Your ability to get a mortgage will be based in part on your creditworthiness. If your credit score is low, look to take steps to improve it.
5. COMPARE PRICES
Like any major purchase, gain an understanding of what your dollar can buy. Home values can vary widely so be sure to compare recent sales online and obtain comps from your realtor.
6. WORK WITH A REALTOR
Realtors know the market and the neighborhoods you’re considering. They have access to inventory that may not be available to you alone. While realtors are a potentially valuable resource to you, you should ascertain whether they work for the buyer, the seller or both.
7. UNDERSTAND YOUR MORTGAGE OPTIONS
Your mortgage type will be based on a number of factors. For instance, though a 15 year mortgage might seem preferable, a 30 year mortgage may afford you a lower monthly payment and more financial flexibility. Consider the pros and cons of each mortgage option carefully.
8. A HOME IS NOT AN INVESTMENT
Your home may turn out to be a good investment, but there is no guarantee that its value will increase. Buy a house because you want to create a home.
Purchasing a home for the first time is filled with questions and uncertainties. Starting the process with these tips in mind may alleviate some of the stress and uncertainty.