The following is a guest post from a You Have More Than You Think partner.
Buying Your first Home
Thinking of buying your first home? It’s an ideal time to buy. The prices of property are the lowest they have been in a long time. Mortgage rates are hovering near their all-time lowest. This may be bad news for property sellers, but it is great news for first-time home buyers. It is important, however, that you understand that buying a home is a momentous transaction that should not be approached lightly.
Define your goals
Accurately define your goals beforehand to facilitate planning. How big a house are you looking to buy? Do you have a set purchasing time frame? What facilities do you want in your new home? Are you buying abroad or in your home country? The clearer you are about what you want, the more focused and better equipped you will be to navigate the sometimes turbulent housing market.
It is worthwhile to consider and answer a few basic questions when shopping for your first house. These considerations can help you better prepare for what lies ahead and prove valuable when discussing details of your transaction with mortgage lenders, insurers and other professionals.
• Property market
Are you familiar with the property market? It is important you understand the real estate market and how much houses are listed. Understanding the asking price for homes helps you align your dreams and financial capability with the realities in the real estate marketplace.
• Credit history
Is your credit accurate and in good shape? Potential lenders perform credit checks to determine how much risk each borrower brings to the table and whether a borrower is a good candidate for a loan. Get your credit report in order by making sure it is accurate and reflects a good credit history before you meet potential lenders. Good credit is central to securing a mortgage bargain.
• Purchase method
How are you going to make the purchase? Innovative loan programs have been developed that allow people to buy homes with little or even no initial money put down. However, most purchasers buy real estate through financing, which is the difference between an upfront payment and the purchase price. The less the money you put down upfront, the higher the monthly mortgage payments you will pay. Determine how you want to purchase your home. Are you going to buy with or without some cash upfront?
Is there someone who can help you? Many first time buyers have been able to make down payments by having their parents take out homeowner loans on their property to help their children purchase theirs. This of course entirely depends upon your parents trust in your financial acumen.
• Down payment
How much down payment can you afford? You often know you are ready to buy a house when you have enough money saved up to put a down payment. Ideally, your monthly mortgage payments should not exceed a quarter of your monthly income. To ensure your monthly mortgage payments fall within this bracket, have ready at least 20% down payment for the house.
• Recent purchases
Have you made any major purchases recently? Your credit and debt history determines how much you can borrow. Records of major purchases in the recent past can lower your borrowing limit. Make sure major loans like car loans and credit and debit card loans are lower than 40 per cent of your gross income to raise your borrowing limit.
• Additional expenses
What additional expenses come with your home? Owning a home comes with additional expenses like utility bills, homeowners’ insurance and house maintenance costs. Note any additional home expenses and prepare for them.
Remember information and planning is critical in real estate. Planning helps you identify cost effective shortcuts in the property market and adequate information broadens your knowledge base and helps you respond intelligently to requests from lawyers, brokers, lenders and other professionals. Keep informed and plan adequately to make buying your first home a pleasant experience.