Are you thinking about buying your first home? It can be an exhilarating experience, but there are a lot of things you need to do in preparation of starting the process. Before you even begin looking for a home, you need to consider a few things in advance. Here are some things to check off your list before you embark on homeownership.
If you’ve been eyeing that house on the quiet cul-de-sac for a few weeks now, it could be the home of your dreams. Or it could be totally out of your price range. Many times when you visit a realtor website, they will offer a home mortgage calculator on the page that gives you an “estimate” of what your house payment will be. This can be misleading because several factors go into play when determining the final monthly note amount. This includes:
- Your overall credit score range
- Property tax amount
- Qualifying interest rate
- The amount and length of your mortgage
All of these things must be taken into consideration when it comes to determining what you’ll pay each month. Your lender will determine your creditworthiness and give you a pre-approval letter along with the amount of loan they are offering you. Surprisingly, everything must be considered, and the amount may not be within your budget. At that point, you’ll have to re-evaluate how much house that you can afford. You may have to find a home in a different neighborhood or work on improving your credit to achieve a lower interest rate. If you decide to purchase a home privately, even though it may be more affordable, you need to make sure there are no liens on the property. Working with nationwide title company professionals allows you to have peace of mind before you close on the property. The title check will look for discrepancies in the title and ensure that the title is free and clear of any debts or attachments from previous owners.
Locating the Right Property
Once you have your pre-approval papers in hand, you can start looking for a home. In many cases, a realtor won’t waste their time showing you homes unless you have the paper in place. Try to look at homes slightly below the amount you’re approved for. This is because, you want everything, including your prorated taxes and other closing costs to be included in the final loan amount. It’s also a good idea to have cash available for a down payment and to contribute toward closing costs. When looking for the perfect property, like one in a gated community, make sure that it is in good enough shape to obtain loan approval. If you’re getting a government-backed loan such as FHA or USDA rural development, the home will need to pass a lead test and have safety precautions in place to ensure final approval. Your realtor will work with you on finding a home in the right school district and on a budget that is affordable for you.
Keep in mind that there are hidden expenses involved with home ownership. The main one is unforeseen repairs. A full septic tank or a faulty sump pump are just two things that could go wrong after signing closing papers. This can be destructive for your budget, so make sure that you have enough money saved up to be prepared for things that may pop up. You can no longer call your landlord to come and fix a leaky pipe or a broken toilet. Also, if you realize you want to make any upgrades, you’ll also have to set that money aside as well.
Keep Your Debt in Check
Purchasing your first home also means you may be light on some home supplies and furniture. You may need a lawnmower or garden equipment, but yet quickly realize how pricey some of these items are. If you plan on taking out a department store credit card out or extending your existing lines of credit, it can directly affect your credit score. Having a high debt-to-income ratio can make your credit score plunge and affect your buying power. Avoid generating new debt. Instead, pay for things in cash or save your funds through an interest-bearing checking account.
Being a first-time homeowner has a lot of perks. Taking everything into consideration before deciding on a home is the best route to ensure success.