24 January 2017

Buying Your First Home? Read this First

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Looking to buy your first home?  You’re in luck!  The housing market is better than it has been in years as the economy continues to makes its slow turn-around.  Still, buying your first home is a big step to ensure your financial future as well as the future of your family. It also means no more greedy landlords, lengthy credit checks, and lack of permanency that renting provides. Buying a house can feel like an overwhelming process, but it does not have to be if you are armed with the right knowledge.  Here are the things you need to know so that you can buy a home with confidence.

Be Fully Committed

They call it “settling down” for a reason.  You can start gathering pins on your Pinterest board for décor inspiration, but you should not purchase a home until you are fully ready to make the commitment.  That is because if you buy a home, you will invest a lot of money—a down payment, a mortgage, and home insurance, just to name a few.  You should prepare yourself to settle down for a few years for it to pay off financially.

Determine a Budget

When you go to look for a home, you should go in with realistic expectations about what you can afford.  Gone are the days where loans were handed out like candy to new homeowners, and for good reason.  Banks want to know that you can afford a home, and you need to know that you can too. Take into account your finances (or you and your spouse’s finances if it applies) to see what you can afford.  As a general rule, your total housing payment should be under thirty percent of your gross monthly income.  Do not fall into the trap of becoming “house poor,” a term used to describe when someone owns a home but can barely cover monthly expenses on other obligations.  If this is the case, consider renting for a few more years.

Get Your Credit Checked

As stated earlier, in order to get a mortgage from the bank, you have to show the bank you can afford it.  There is no better way than a credit check to see where you are at.  The best way to do either of these is to pay off credit card balances and possibly stop using them a couple months before you apply for a mortgage.  Another good tip is to not apply for a new credit card or car loan until you have closed on your new home.  Get started on improving your credit as early as possible!  If you are trying to buy a home in the next year, remember that it will take at least six months to recover your credit.  Note that if you are buying with a spouse or partner, then the lender will evaluate both of your credit scores.

Shop for a Mortgage

Before you look at houses, you have to look at your budget, but after you know your budget, you have to shop for a mortgage.  Get your mortgage pre-approval as soon as you can—it is a free and non-binding process, and is essential to showing sellers that you are ready to sign immediately.  If you go in without a pre-approved mortgage, another buyer may swoop in on your dream home, and the only difference between the two of you may be the mortgage.  Don’t let this happen to you—be prepared so you can jump on the house you want right away.  Know that there are two types of mortgages: fixed-rates and adjustable rates.  You can take out a mortgage for different spans of time and different interest rates.  The most common loan is the 30 year fixed rate mortgage loan.  If you are unsure which mortgage you should get, consult with your real estate agent for help.

Reflect on these points and analyze whether you are ready to buy a home.  Whether it be now or in a few years’ time, you will be happy that you bought a home in your budget at the right time of your life.

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