Are You Thinking of Buying a Home?
Great! The earlier you get started, the better your buying experience will be. What do you need to do before you buy a home?
Start Saving Money
Before mortgage applications or looking into properties, you need to start saving money for a down payment and other home buying expenses. Make sure your finances are in good shape. Lenders will examine your credit score, credit history, and how you manage debt.
If you finances aren’t that great, find ways to improve it. Consistently, make required payments on time and pay down debts which will make your debt-to-income ratio better.
Depending on your situation, you might not have to put down 20%. There are different programs that you can explore to see what might be a good fit for you. If you do put at least 20% down, your mortgage payment will be lower, and you can generally avoid paying for mortgage insurance.
What Kind of Home Can You Afford?
It’s fun to dream about living in a mansion on a hill, cottage at a beach, or a home in the mountains on several acres. But as a first time home buyer, you will need to focus on what neighborhoods and types of properties you can afford.
A common guideline to follow is you should only spend between 25%-30% of your monthly gross income on your mortgage payment (ie., principal, interest, taxes and insurance). To determine how much you can afford, multiply your monthly gross income by 25%-30%. Or check Mortgage Calculator here.
Expenses To Expect During Your Journey
In addition to your down payment, you’ll need money for your closing costs that that typically add up to 2%-5% of the purchase price of your home that you’re buying. Closing costs are fees and services that you will pay for when you finalize (close) on your home purchase.
Fees and Services You Might Have in Your Home Buying Process
- Mortgage Application Fee
- Appraisal Fee
- Title Insurance
- Mortgage Insurance Fee
- Home Inspection
- Legal Fees
- Homeowner’s Insurance
- Survey Fee
- Property Taxes
- Moving Expenses
Of course, if you don’t have a lot of furniture or possessions, you will be able to save money by renting/borrowing a truck or trailer, asking some friends to help, loading everything and moving yourself!
