Are You Ready to Buy Your First Home?
Wouldn’t it be incredible to have a house of your very own? No more renting and having to worry about your creativity being limited when it comes to decorating and injecting personality into the interior! If you are considering taking the plunge and going in search of your first home, these are the questions that you need to ask yourself. (Image Credit: leemelina08/Pixabay)
How much can I afford?
This is the number one question that you will need to answer both accurately and honestly. Remember – buying a new home is a lot more expensive than you might initially think. While you will likely be taking out a mortgage, you will need to present a substantial down-payment, as well as settle closing costs. Closing costs can amount to up to 5% of the purchase price of your home! Furthermore, you will need to pay for the move itself, along with furnishing and decorating the home after moving in. In short, it is a costly exercise and you need to be prepared for it financially.
As for your budget for the house itself, you need to ensure that your monthly payments do not exceed 25% of your monthly income. This 25% should factor in more than just your mortgage repayments, but also your property taxes and your homeowner’s insurance.
How much do I need as a down-payment?
The higher your down-payment, the less you will pay in interest for your mortgage. This is why it is recommended to put down as much money as you can afford. While you might be able to get away with putting down a minimum of 5% with some lenders, you should always strive to avoid putting down any less than 10 – 20% of the total value of the home.
What do I ‘need’ and what do I ‘want’?
Make a comprehensive list of the features of your new home that are non-negotiable, and a separate list of features that would be ‘nice to have’. For example, if you are a family of three, you will require a minimum of two bedrooms in order to be comfortable. However, that massive outdoor heated pool probably isn’t quite as necessary. Focusing on your needs instead of your wants will make it easier to find a house that falls within your budget.
Where do I want to live?
The quality of the neighborhood in which you reside plays a huge role in how content you will be living in your new house, so think about this carefully. Most investment experts will tell you that it is better to buy a smaller and more affordable home within a great neighborhood (like Beverly Hills, of course!), than to buy a large, expensive house with all of the bells and whistles in a run-down neighborhood. There are a number of factors to consider regarding the neighborhood you choose, such as how conveniently located it is to where you work, how close by it is to friends and family, and how it is designed.
Be sure not to rush the process of buying a new home. It is a special time, so enjoy every moment and never make a decision without taking the time to really think it through.