You’re getting ready to make one of the largest investments you’ll ever make: the purchase of a home. It’s a thrilling move, and you should be proud of yourself for reaching this point!
Many first-time buyers go into the process presuming they’re fully prepared, only to encounter unexpected expenses and difficulties along the way. But if you go into this with eyes open, and you’re ready for the typical issues as they arise, you should come out all right.
Many people choose a home based on its location. They want to be close to work and in a favorite neighborhood. Study details such as schools, crime rate, and unemployment. The better these factors are, the better the neighborhood should be.
“You can’t move a home -- at least not easily or inexpensively,” says an article from Fox Business. “When you buy a home in a good location, it’s usually a solid long-term investment.” That’s why it’s so vital to select a great location before you buy.
Your credit score will play a crucial role in whether you can purchase a home or not. In most cases, a score of 740 or more will guarantee you a loan with a great interest rate.
The lower your score is, the higher your interest rate will be. If you score below 650, you’ll not only have a harder time qualifying for a loan at all, but if you do qualify, you’ll be saddled with a high interest rate.
If your credit score is fairly low, there’s time to fix it. “Many young would-be home buyers might find themselves with blemishes on their credit report, thanks to missed student loan or credit card payments,” says an article from Kiplinger. “If you check your credit report early, you'll have ample time to correct any issues.”
You could face some financial details that may limit your ability to purchase a home, so you need to consider them carefully before attempting a purchase. First, figure out how much home you can afford.
According to FHA laws, your mortgage payment cannot exceed 31 percent of your monthly income. The reason for this determination is to make sure you can handle the purchase for the life of the mortgage.
“You don’t want to take a huge risk with what could be the largest purchase of your life, so try to make sure your debt-to-asset ratio is something you’ll be able to sustain for 30 years,” says an article from Houston’s realty team Green Residential.
Not all mortgages are created equal. Shopping around can get you the best possible deal. There are fixed-rates (the interest stays the same) and adjustable rates (the interest rate fluctuates depending on the market).
Most buyers look at a fixed-rate mortgage because there’s less risk involved. When you decide which might be the best for you, discuss the options with a financial advisor and/or loan officer. An expert will help you see all the risks and what would be best for your particular situation.
You’ll probably want to order a home inspection to make sure the structure is in as good condition as the seller claims. The inspector will look for things like water damage, foundation issues, roof and siding problems, and other major issues that could cost you substantially in the future.
An inspection is essential if you want a good deal. “A home inspection will cost you a little bit of time and money, but in the long run you'll be glad you did it,” says an article from Investopedia.
“The inspection can reveal problems that you may be able to get the current owners to fix before you move in, saving you time and money. If you are a first-time homebuyer, an inspection can give you a crash course in home maintenance and a checklist of items that need attention to make your home as safe and sound as possible.”
When you’re buying your first home, don’t skip these essential steps. The extra time, effort, and money you put into the initial research and preparation will save you big in the long run.