Buying a home for the first time can be exciting, but it can be nerve-racking too. You have to contact many people and property sellers to find the home that suits you.
Don’t be an impulsive buyer! Before you buy a house for you and your family, there are plenty of questions that need to be answered. Meeting a few property sellers and relying on one after clearing all doubts can help ease the process.
Here are a few tips for homebuyers to tackle the home-buying process:
Build an Emergency Fund and Pay off All Debts
Buying a home is way more expensive than renting one. When you own a house, you are responsible for maintenance and the upkeep cost of it. And those can add up fast! So make sure you have cleared all your debts and have built an emergency fund of three to six months of expenses in place.
When you get into your home with an emergency fund and no payments besides the mortgage, you can easily pay for huge expenses that suddenly come your way. This will help you settle fast and stress-free.
Even if you have the emergency fund, be mindful of your budget when you are decorating and filling your house with new furniture.
Be Mindful of Your Budget
Check your monthly budget to determine how much of a house you can afford? Before you get emotionally attached to a beautiful house. The monthly housing costs of your house should not be more than 25% of your monthly take-home pay.
You need to leave a room in your budget to compensate for your other expenses like furniture, electronic devices and other appliances.
Save a Down Payment
Save for a down payment of 15% or more if saving to pay money for the total price of a house isn’t feasible for you. This way, you will not have to pay for private mortgage insurance.
If a down payment of 15% seems out of your reach, then you can opt for first-time homebuyer programs that offer single-digit down payments. Here are some low-to-no down payment debt options to avoid:
- FHA Loans: You will have to pay a mortgage insurance premium for the life of the loan, which includes thousands of dollars.
- Adjustable-Rate Mortgages: They ask the lender to adjust the rate to transfer the risk of increasing interest rates to you.
- VA Loans: This type of loans allows the buyers to buy with no down payment, but you can easily owe more than the market value of your home if there is a shift in the real estate market. They charge a higher rate of interest compared to conventional loans.
Save For Closing Cost
You will need to pay for closing cost along with the down payment. You property seller will guide you regarding the closing cost. These fees pay for things mentioned below in the home-buying process:
- Credit report
- Homeowner’s insurance
- Home inspection