Financial Advice for First Time Home Buyers
The Internet is filled with resources on tips for first time home buying. However, here we will be focusing on the financial aspect of home buying because, keeping aside the emotional quotient associated with it, a home is purely an investment and involves huge stakes.
Having decided to buy your first home, you and your family must be in a celebratory mood. However, considering the quantum of money at stake you should keep yourself informed with all the nitty-gritty of financing the purchase. Being financially literate is the first step to take before you even start looking for your dream place. Here are some tips, coming straight from the experts that will help you in keeping the financial part of the buy under your control.
Work out a realistic budget
The easiest mistake that you can commit is overestimating what you can afford. Once you buy something that doesn’t fits in your budget, it has life-long repercussions on the way you lead the rest of your life. You would not want to lead a life in poverty only because you extended yourself and do not have the money to spend on anything else other than mortgage and utility bills.
The best way to know how much you can afford is to determine the mortgage amount that can easily fit in your monthly budget along the years. Since your monthly budget will also get inflated down the line due to inevitabilities such as kids, medical conditions and others, do your calculations accordingly.
The general rule says that your monthly housing costs shouldn’t be greater than 25% of your gross monthly income to qualify for a conventional house mortgage, where interest payments, mortgage principal payment, property taxes and home insurance together constitute the monthly housing costs.
Get pre-approved for mortgage and find the right lender
Once you have calculated the costs of home ownership, it is time to find the right lender. You will have a long term relationship with your lender and therefore you must choose utmost discretion while selecting the right lender for the job. Interview many before settling on one. Research the background of the lender to know its reputation, knowledge, skills, history, clients and service standards. Ask as many questions as you can. The lender will walk you through different financing options and what would suit you the best.
Keep a clean credit history
Before the lender gives his approval, he will run a background check on your credit history to find whether you qualify for the loan or not. A poor credit score, which is reflected from a great amount of outstanding debt, will mar your chance of getting a home loan. Or on the very least, it will reduce the home loan amount that the lender is willing to lend, putting a dent on your plans for a great first home. Therefore make sure you haven’t defaulted on your credit card bills and if there are some issues with your credit history, get them in order even before you embark on a home search. You can take the help of a qualified loan officer, mortgage broker to what you can do improve your credit score.
Plan your closing costs
Buying a home isn’t all about the monthly mortgage. There are a lot of other additional costs involved which you mustn’t discount on. Closing costs like stamp duty, solicitor’s fees, survey costs, initial furnishing and a couple of other expenses can significantly inflate your final budget. Also remember the monthly costs do not yet include the utility bills and taxes that you will be paying every month or quarterly. The amount of these costs depends on the location of your home and its size.
Delhi born Saurabh Tyagi has a penchant for writing, which he discovered early on in life. He likes to put pen to paper every now and then for topics such as 1 bhk flats, serviced apartments for sale and commercial real estate property. . Currently he writes on behalf of a leading real estate site.
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Category: Housing
