After a long and stressful day at work, you drive back to the only place that assures comfort. Your home: your safe haven, somewhere you can unwind. But how great would it be if you were able to come back to your dream abode, one you actually own.
While renting a house has its own benefits, owning your home is a feat incomparable. The sense of pride and freedom that comes with it is unparalleled. Not to mention a place that will hold memories of the present as well as the future to come.
And while some people manage to cross off a home purchase from their bucket list, for many, it still remains a dream. But if you’re somebody looking to buy a house, that too is your first one; the path may not be as straightforward.
Taking a plunge into the buying pool for your first home can be an exhilarating yet daunting experience. Whether you prefer a minimalistic loft up in the city or a traditional suburban white picket fence home, there are a number of considerations to be made.
Hence, to aid you in your home buying quest, here are five key factors you should consider before taking over the keys.
Sort Out Your Finances
Sorting out your financial situation before getting the keys is absolutely crucial. You will need a game plan on how to arrange the initial amount and tackle those hefty interest payments that follow.
Examining your bank statements, your income, and your job security will help you determine your financial state. You should be able to assess which expenses can be cut back and if you need more viable streams of income. By the end, you will be in a better position to know if you’re ready for a house purchase.
Moreover, if you plan with the right budget and long-term financial adjustments, you can keep a realistic idea of the house you can afford.
Deciding On Mortgage
Once you have successfully set aside a reasonable budget for your purchase, the next step is to find the right mortgage. Since you will be financing a massive amount, it is imperative that you choose wisely. In fact, your finances may be adversely affected over time if you make bad mortgage decisions.
Mortgages can be classified as either fixed-rate or adjustable-rate loans. A fixed-rate loan is when the interest rate and the payment for it remain constant for the entire loan. The time period is usually around fifteen to thirty years. On the other hand, an adjustable-rate mortgage, or ARM, usually has a fixed rate that then resets after a certain period of time.
Most people favor fixed interest mortgage arrangements as they are more stable. With fixed interest loans, you keep paying at the same rate regardless of economic changes. The only downside, however, is that you may not be able to benefit from lower payments if interest rates go down.
You have the option to choose whichever you prefer. However, a good rule of thumb is if you can only afford a home by getting an ARM, it is not the right choice for you.
The Down Payment
Your down payment is perhaps the first step to actually owning your house. Your down payment amount is crucial in determining the length as well as the number of your future payments. In the case of a traditional mortgage, you need to contribute at least 20% to the purchase price.
However, if you’re unable to conjure up 20% of the value, be sure to obtain private mortgage insurance or PMI. This will mean paying additional mortgage insurance fees. But you will be able to get clearance for your dream house earlier.
Make A List Of Necessities
No home you buy will be completely perfect, at least right off the bat. So, it is important to make a list where you actually understand the difference between your necessities and your wants. Your needs should be things that are absolutely non-negotiable, whereas the things you desire, while nice to have, can ultimately be negotiated with.
This is because once you start looking at places, it is very easy to get these two confused. And can ultimately drag out the choosing and buying process. Furthermore, being clear on the difference between these two will help ensure you are not spending the absolute maximum on the home that you can afford.
Invest Time In A Trusted Realtor
Before you begin the process of actually purchasing your home, availing services of a qualified and trusted realtor is crucial. You should always look for a realtor that you know and trust and feel shares your best interest.
Talk to several different realtors before making your decision, do your research and make sure to review your contract carefully.