Planning and organization will be central themes to your preparations as a first-time homebuyer. This process can be a little nerve-wracking, but it is more than manageable with a little research. Here are some tips to help you along the way as you prepare for one of the most important financial decisions of your life.
Start Saving for a Down Payment
The down payment you will be expected to make when purchasing a home is typically between 3.5% and 20%. Most people will have to save money in order to prepare themselves for such a large expenditure. You should begin to save as early in the process as possible. You should also perform your due diligence regarding mortgage loans and down payments since many options will be available to you. For example, some mortgage loans allow people who put a smaller percentage down to get a bigger loan.
It may be tempting to invest the money you are saving for a down payment so that you will have more of it when the time comes to purchase your home. It is probably a good idea to avoid this temptation, however, because the last thing you would want is to not have access to your funds if a house you desire suddenly becomes available.
Build Your Credit
It probably comes as no surprise to you that the best mortgage rates go to the people with the best credit scores. If your credit is less than desirable at this time, it is not necessary to give up on your dream of homeownership. Instead, you will need to spend some time cleaning up your credit report. Remove any mistakes and work on items that may be causing the problem.
Possible methods to raise your credit score include paying down debt on credit cards and not using them for at least two months before applying for a mortgage. You will also want to avoid applying for new credit offers until after you have purchased your home.
Know What You Can Afford
The large price tags and extended payment periods attached to houses make it sometimes difficult to keep things in perspective when comparing the price of one home to another. It could seem like there is not much difference between $300,000 and $450,000 when you have 30 years to pay off a mortgage, yet there will be a considerable difference in the amount of your monthly payment.
There are not many accomplishments more fulfilling than purchasing your first home. For many people, homeownership has been a dream since they first began to work for money on their own. The tips offered above will get you off to a good start as you prepare for one of life’s greatest achievements.
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