How to Buy Your First Home
Buying a home is one of the primary goals of most citizens. There is nothing like the satisfaction of owning your own property. But buying your own home can be a challenge, especially if you are a first-time home buyer. Here’s how to buy your first house.
Clean Up Your Credit
The first step to buying a new home is to clean up your credit. A home loan is a huge undertaking and the bank is going to want to be sure you are worthy of the risk. Pay off old loans and close all the little credit cards you don’t use or need any more. Leave your oldest cards open, however, unless they charge a fee – these show how long you’ve had credit.
Save Up for a Down Payment
Unless you’re entitled to a government loan, it is likely you’ll need at least 5% of the home’s price to put down when you buy. You’ll also need cash for closing costs which can be another 2-3% of the home’s price. Stash money away in a safe place or get help from family to set up a small nest egg so that you’re ready to buy when the bank checks to be sure you can actually afford the down payment on the home.
Establish the Budget
Before you shop, you should take the time to figure out your budget. A very rough guideline is that your new home should cost no more than twice your annual salary. If you make $50,000, your home should be $100,000. Obviously co-borrowers can afford more. Think about your future before deciding on an expensive home, however. If one of you will be staying home with future children, a smaller mortgage payment might be beneficial. Add up your monthly obligations, take out money for savings and other odds and ends and look at the amount you can pay monthly without feeling pinched.
Get Pre approval
If you’ve worked with a monthly number rather than a broad total, head online to a free mortgage calculator to see exactly what your payments will be with mortgage, taxes and insurance each month. Then, when you’ve reached a number you’re comfortable with, apply with a finance company to become pre approved. Getting pre approval on a mortgage tells sellers that you are a safe buyer and that you can get the loan when the time comes for money to change hands.
Shop For Home Loan Options
Finally, with your pre approval complete, contact a realtor or browse listings yourself and start shopping. By staying carefully within your budget, you’ll find the perfect home in no time at all.
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Posted in Business & Finance, Real Estate
