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Preparing to purchase your first home can be daunting. Make sure you’re ready by asking yourself these five questions first.
Buying a home is major financial process that can take months to complete. Potential homebuyers should start this process by making sure that they’re ready for some of the less obvious aspects of home ownership. Getting ready to own a home is more than just being able to make the mortgage payment every month. Ask yourself these questions before you start the process of getting a mortgage and looking for a home.
- What will I have to sacrifice from my budget to buy a home? When you apply for a mortgage, you’ll submit a lot of information about your personal finances. Your mortgage broker will then be able to give you an upper limit as to how much you can borrow for a house. In many cases, however, it’s not a good idea to buy a house that costs the maximum amount of what the bank says you can afford. Take the time to look at your budget and determine how it might accommodate the payment of a mortgage before you start looking at houses. Often, it makes sense to buy a less expensive house and increase your savings.
- Is my credit good enough? A poor credit score won’t necessarily exclude you from qualifying for a mortgage, but a better credit score can help you get a lower interest rate. Fortunately, there are lots of things you can do to improve your credit score. Get copies of your credit reports, work to fix any errors, then take steps to improve your score as much as possible before you apply for credit.
- How long will my savings last? Plenty of financial advisors tell their clients to save up enough money to pay for eight months of expenses to prepare for emergency events, such as job loss or illness. Banks also like to see that you have enough in savings to cover the mortgage payment for a few months. These savings should be in addition to the money you have saved for repairs, a down payment, and closing costs. Home ownership comes with many more unexpected expenses than renting does, making it necessary to have a lot more in savings than you had while you rented.
- What do I know about home repair? At first glance, this doesn’t really seem like a question related to mortgages, but if you’re considering buying a home, you need to know that it will probably need repairs. If you rely on a landlord to fix everything in your current house or apartment, you might want to take the time to learn about home maintenance and repairs. Understanding the basics of how a heating or air conditioning system works, how long a roof should last, and how to fix a running toilet can save you a fortune on home maintenance and repair costs. The money you save can make the difference between paying your mortgage one month and missing the payment. Most importantly, being honest about how much you know about home repair is crucial for when you start to shop for a house. If you’re a beginner at home repairs, then taking on a house with a lot of renovation work is a path to disaster. Take the time to think about what kind of work you can take on and what your repair budget is like before you start looking at houses.
- What do I want in a home? It’s a good idea to think about the features that are the most important to you before you start working with a Realtor. Start by thinking about different factors, such as commute time from work and the schools you want your children to attend. Once you have a few neighborhoods picked out, start thinking about the amenities that you need in your home. Doing this before you start looking for homes will help you narrow the field considerably. You’ll be better able to compare a small list of houses than a large one, and you won’t be distracted by homes that have a lot of nice features, but not the ones you need.
Topics: Financial Education