Are You Ready to Buy a Home?
May 29, 2015 | Tom Ashworth
Tips on How to Buy a Home
Whether you’re a first-time homeowner or a repeat buyer, purchasing a new home is a personal and financial undertaking that requires the support of an experienced team of professionals: a realtor, lender, and an attorney, to name a few.
Why Do You Want to Buy?
The personal part of the buying decision comes into play when you consider why you want to move. First-time buyers typically want career stability and plan to live in the same community for up to seven years. They want to establish roots in a neighborhood and decorate their home freely, without having to take a landlord’s restrictions into account.
Buying a house is a lifestyle-related choice. You need to think about how you like to spend your time. Consider the community you want to call home. Do you prefer a rural location without close neighbors, a city high-rise, or a home within a planned community that has recreational amenities? The more you understand what you really want in your future home, the easier it will be to make a decision.
Home ownership can also be a strong way to increase your personal wealth, as you’ll be building equity in the property as you pay off the mortgage.
Are You Set Up for Home Ownership Financially?
You may not be able to afford your dream home right away, you can prepare for home ownership the moment you earn your first paycheck. You will need good credit, a record of saving money and paying your bills on time. The lender will verify a maximum debt-to-income ratio (gross monthly income compared to minimum recurring debt payments). A lower debt-to-income ratio increases your chances of a loan approval.
There are currently loan programs with low down payments of 3.5 to 5 percent, and some programs require zero down payment, but you will still need money to cover closing costs, moving expenses, a deposit, and post-purchase cash reserves. Saving money and keeping your credit in good shape are essential steps in future home ownership.
What Can You Afford to Buy?
Property and rental prices vary from one place to another, but rent vs. buy calculators are available to estimate the cost difference between your current rent and buying a home. Buying a house can cost even less than renting in some markets. It’s important to remember that homeowners have additional costs such as insurance, property taxes, and association dues. Home affordability calculators can help you estimate what a home will cost you. You should also consider your future plans, how you spend money, and how comfortable you are with mortgage payments. A lender will tell you how much you can borrow. But they won’t know how much you spend on travel or hobbies or other things you do. So you have to take your lifestyle into consideration.
Once you’ve carefully considered the personal and financial ramifications of owning a home. Then you next steps should be to find an experienced and reliable Realtor. The Realtor will guide you through how to buy a home. Also help you meet with a lender who can discuss your financing options.