Buying your dream home can be an exhilarating experience. But it comes with its own set of challenges, too. Hence, there is a bit of apprehension in the minds of those buyers, especially first-time buyers.
Here are the seven key aspects you should know so that you’re confident to take up the home buying journey without any hiccups.
1. Know Your Credit Score
Checking your credit score is the first step in your home buying journey. This will help you understand where you stand financially. Mortgage lenders consider the credit score to decide on your creditworthiness.Some companies such as United Consumer Financial Services may also not want to finance your purchase, although reading unbiased and honest reviews online will clue you in on their exact requirements.
If your credit score is high, you can negotiate to get a cheaper interest on your mortgage, which translates into lower monthly payments.
In case your credit score is not up to the desired level, take some time to fix it before you start your home-buying process.
2. Get A Pre-Approved Mortgage
Having a mortgage pre-approval will help you stand out from among the buyers. No need to say that the sellers will take you more seriously if you have a pre-approved mortgage and the chances of the deal closure are high and easy.While getting a credit score may take a couple of days, getting a pre-qualified mortgage is a slightly long process since it involves submitting papers related to your income, assets, debts, and credit.
This also shows how much a lender is ready to offer you, thereby helping you with your buying decisions.
3. Choose Your Interest Rates
There are floating and fixed interest rates, and it varies according to the type of mortgage. If it’s a floating rate, the payments will fluctuate with interest rates. With a fixed-rate mortgage, the rate is fixed irrespective of the market fluctuations.This aspect is critical as even small differences in interest rates can quickly add up to your expenses. Hence, it is wise to choose an appropriate mortgage.
A popular guideline most mortgages go by is the 28/36 rule. This means your spending should not be more than 28% of your gross monthly income on housing costs and not more than 36% on total debt, including car or student loans, along with housing.
Lenders use this rule to evaluate their borrowing capacity. You can also arrive at this using some simple math. If your debt-to-income ratio goes over these limits, you may have to pay a higher interest rate.
4. Draw A Realistic Budget
Before finalizing your property, consider every potential expense like property taxes, insurance, utility bills, and other recurring costs. Make a comparison and analyze which property suits you the best.You should also look at the long-term financial commitment between properties. If a property requires heavy maintenance or repairs, you should go slow and think twice since it can incur heavy expenses, causing a strain on your budget.
Many first-time homeowners forget to add closing costs to their budget. Closing costs differ according to your loan, but you can anticipate an extra 2-7% of the total cost. This is in addition to the down payment, which is often in the range of 10 to 20 per cent.
Since purchasing a home is a major financial decision, it helps to read an Acorns investing review before using the tool to manage your money.
5. Get An Experienced Real Estate Agent
Consider signing up an experienced professional to help you in your home buying. Though an exclusive buyer agent will add cost, he or she will bring the expertise to help you make a smart purchase. If you want to save money and still hire an expert realtor, look for a flat fee realtor in your area that can take care of everything for a fixed price.Take this chance to get all your questions and clarify your concerns about the purchase with the agent. It's one of the smartest things you can do when you enlist the services of a real estate agent.
6. Check Out The Neighborhood
Once you zero in on a house, don’t forget to properly assess the neighbourhood. Since you are going to be living there for several years, check out whether the community suits your tastes and requirements.Some things to look for are public transport facilities, grocery shops, and amenities like schools, theatre, and fun nights out. Take a drive in the night to see how the neighbourhood looks and what vibe it is giving you.
Ensure that the neighbourhood is a good fit for you and your family. If possible, spend some 48 to72 hours in the neighbourhood before you close the deal.
Also, make “listening visits” for trucks and trains—especially late in the night or early in the morning. Get to know the noise levels and whether you are familiar or are okay about it before your potential purchase.
For those with young children or those who’re planning to start a family, school is an important consideration when selecting a home. School rankings, talking to school alumni, and visiting the schools in person will do well before the deal finalization.
7. A Lifestyle Choice
Buying a home is not only a financial decision but also a lifestyle choice. It’s nice to own a home that is equipped with all the modern conveniences and luxuries. It is wise to invest in a property that is bundled with amenities.But homes with additional amenities come with a high price tag, and not every amenity may be of use to you.
If you have small children, a games room or backyard is a must. Grown-up children care more about fitness and exercise, so it’s always better to opt for a home that has those facilities.
If you love hosting parties and having pets, look for homes that offer a barbecue place and kennel.
If a garage is non-negotiable for you, try lowering your expectations with other amenities. Before saying yes, look out for features like solar panels, home security, and energy-efficient windows.
Finally, find out the commuting time to work before finalizing the purchase decision. Take test rides and check out on the mass transit routes and duration of travelling time and convenience. Make sure about the transportation facilities if you work odd hours.
