Owning a house is a significant step in life. You need to be financially stable enough to make that move.
Generally, a house is bought not only for oneself but for the family as well. Certain standards have to be met when taking that big decision and making the monetary splurge.
Buying a new house as a first time home buyer can sometimes become a hassle, though. Houses are mostly purchased on loans and not direct payment.
So one of the biggest hurdles that one has to clear is to apply for a loan and get approved by a legal bank or lender. Proper research also needs to be put in about the best pricing in the choicest of localities, and only when all the conditions are met should a person make a move.
You should also take care that the loan should not be so high that you get entirely balked down by it. These are some of the basic things most first time home buyers tend to overlook.
Top 8 Important Factors and Tips for First Time Home Buyers
If you are looking for tips to keep in mind as a first time home buyer, this article might be of real help to you. Here are the top important factors to consider when buying a house:
1. How much house you can afford
Before taking the first steps of looking for a house, the first thing that you need to determine is how much money you can invest in buying one.
Affordability is a major deciding factor as the type of house, and the location will be determined by it. It doesn’t matter if your budget is low or high, a house is a house after all, and the main thing that defines a house is the people living in it.
As far as the security of your family is concerned, you can look for reliable security systems for your commercial or residential properties.
Thus, take some time off and calculate all your savings and how much loan you can afford and repay without any struggle, and once all of this is done, only then figure out a budget. You will have a fair idea of how much house you can afford after doing that. Make sure you stick to your budget as a first time home buyer.
2. Talking to only one lender
One big mistake that many first time home buyers make while buying or leasing a house is to talk to only one seller or lender.
There are plenty of fish in the ocean, but you won’t be able to test them if you don’t decide on the ocean itself. Therefore, don’t restrict yourself to one lender even if you really like the house that you see in the initial stages.
Do a little more research and talk to multiple people. Who knows what is waiting down the corner. Moreover, it is a good move from a financial point of view as well as you will get the best price for a house when you talk to multiple lenders.
3. Credit score requirements
Credit scores are an important aspect to consider when applying for loans to buy the house as it is a determinant factor for the actual issuance of the loan.
So get it checked before applying for a home loan. If your credit score is not that amiable, you should take steps to bring it to the normal range. You can do that by clearing a large section of your previous debt at once so that the outstanding money reduces.
Do not apply for any other loan while you are repaying your home loan. Don’t even open new credit accounts as it might drag down your credit score even further.
You have to take care of your credit score and make sure it doesn’t dip alarmingly. A credit check should be done at regular intervals so that things don’t escalate beyond control.
4. Debt-to-income ratios
It is okay to have a little debt profile in the market.
You cannot afford all the things with hard cash down payment, and it makes absolute sense to take some money from an organization capable of doing it and then to repay them back slowly.
What does not make sense is to have debts that exceed your income so that repaying the debt becomes a huge problem.
Even while applying for a home loan, you should be aware of how much debt you are going to be in and do you have enough financial income to not only repay the debt but also supplement yourself and your family.
Getting an accounts expert to do the calculations is an acceptable method as the results are more certain.
5. Prepare your finances for the mortgage research.
Whenever you take a loan, the lender asks for a mortgage.
It is basically an entity that the lender keeps as a security to his name which can be subjected to auctioning or selling if you are unable to repay your debts in a predetermined period.
When you are applying for a home loan, you should be able to produce something that can be kept as a mortgage, which might be a property or a car that is completely owned by you or anything of similar value.
So, depending on the amount of loan you are planning to take, research and prepare your potential mortgage as well so that there is no problem in the approval of the loans.
6. Research state and local assistance program for first time home buyers
The federal government assists in several aspects when applying for a home loan. Other than that, state and local government also play a significant role, especially for people buying a house for the first time.
It can be either in the form of monetary discounts or can also be along with the tax deductions, assistance in down payments, and assistance in getting the closing costs. These are additional perks that you can utilize so never let go of that opportunity and grab it with both hands whenever you can.
7. Compare mortgage rates
If you go to one lender and ask for mortgage rates and settle on it, the chances are that you are at a loss. You should compare mortgage rates from at least three lenders before deciding on one.
According to statistics, a person can save almost $3500 in the first year of payment when looking at multiple mortgage rates. You can also ask if there are any discount schemes for the mortgages.
Some lenders allow you to prepay a certain amount of interest so that your interest rate becomes low subsequently. All these offers you won’t get only by looking at one lender, so keep your options open till the last minute.
8. Miscalculating the hidden costs of ownership
This is one of the biggest blunders that you can do while looking for homeownership as a first time home buyer. But what is actually surprising is the fact that it happens quite frequently.
One common cause is to make the calculations without taking everything into account and forgetting to include some significant hidden costs.
If you do not have a proper knack for finances, it is common to end up in this soup. Therefore, hire someone whose job is to make these calculations to avoid any such ambiguity.
If you feel you are ready to make the big move of homeownership, don’t wait any longer. Keep the above-mentioned points in mind and have your finances sorted, and you are good to go.
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Jackson Maven loves working with finance professionals to brainstorm ideas on how to get everyone more financially stable.