Are you thinking of buying your first home?
Buying your first home is one of the biggest financial steps that you will ever make. It is important to take this decision seriously. You need to take the time to prepare yourself in every aspect in order to make your home a blessing, and not a negative experience. Here are the basic steps that you should follow when it is time to buy a home.
Determine If You Are Ready to Buy a Home
You should determine if you are ready to buy a home.
Home ownership is a lot more expensive than renting. You are responsible for paying for all the repairs. You may also have added utility costs, such as garbage and water. In addition to that you will need to pay for taxes and insurance related to your home
Find the Best Payment Options and Loan Types
Usually a fixed rate 15- or 20-year loan is the best option. This can help you lock in a low rate. You may be considering creative financing to cover the down payment, but you should be careful when you make these choices. You want to build wealth with your home purchase. If you make the wrong choice than you may end up hurting yourself financially. If the market drops, or if you need to move sooner than you planned, you may find that you are underwater on your mortgage and you owe more than your home is worth. A down payment can help you avoid that and makes it easier to sell if you need to move
Be Honest About What You Can Afford
You also need to determine how much home you can really afford. A good rule of thumb is to keep your mortgage along with your taxes and insurance between 25 and 30 percent of your income. Other experts advise that your home cost be limited to two and half times your annual salary.
Find a Good Realtor
Once you have determined how much you can really spend and are pre-approved you should find a good realtor. Your realtor should listen to your wants and needs carefully. She may make recommendations or explain the market to help you find a home that suits your needs and that you can afford. She should offer several different options. Once you make an offer your realtor should work to negotiate terms that you are happy with. A good way to find a realtor is through the recommendations of friends and colleagues.
Be Patient During Escrow
Once everything is completed for escrow you will sign the closing papers. You may or may not sign your mortgage papers at escrow. If you do, you can request that the bank send a representative to help you fully understand your loan.
- It is important to realize that you need to include the cost of taxes and homeowner’s insurance into your monthly housing cost. With the insurance and taxes your monthly housing costs should not be more than thirty percent of your monthly salary.
- Additionally you should be prepared to pay for all of your closing costs out of pocket. This will save you money over time. If you are finding it difficult to save up for closing costs you may not be ready to purchase a home.
- Be sure that you can afford your home payments. Do not stretch yourself because you may end up losing your home, which can destroy any good memories you have of your home. If you are not sure you can afford a home, try sticking to a budget with what you expect your home payment will be and put the extra money in savings. This can build your confidence and your savings so you can move forward with the home purchase.