The stress involved in buying a house could put you off even before you start. Luckily, the excitement plays a great part as well.
There are several grounds to cover before you finally become a proud homeowner so I have simplified them by providing some basic tips for buying your first house.
Determine if you are ready to become a homeowner
Homeownership is probably not as easy or good as it sounds. There is a reason why many millennials dread buying a home. While people love having something in their name, the costs incurred are unsustainable for many in the current economy. Your first job prior to making a purchase is to determine the size of the house you think you need. Select the area where you would like to live and look up the prices.
Try finding out how much in taxes and utility bills you will be looking at after closing the deal. Also, there is a study, conducted by the National Association of Home Builders, showing that a new homeowner spends, on average, additional $10,601 within the first year on furniture, appliances, and repairs. So make sure you use American Standard HVAC dealers or a plumbing company to make repairs that will last a long time.
Raise your credit score
There are several processes happening at the same time related to home-buying. The moment you start thinking about becoming a homeowner, you should start working on your improving your credit score. It is never too early, yet it can be too late and postpone the shopping.
Give yourself several months for this process, you can even give it a year if you know that you have been missing a lot of payments. Get your credit report card to see what you are working with. If there are any items showing up that you do not think are right and have a proof of it, file a dispute. Have at least three or four recently active tradelines and keep your old credit card.
These all prove that, yes, you are in debt, but you can make the payments. From the moment you decide to buy the house, until the moment you buy, do not make any new credit lines and put your credit cards aside. It is now time to show that you are steady, as well as your income and your account balance.
Make a budget
The first thing you should take into account when making a budget is your gross income. The next step is determining the exact amount of your monthly liabilities. Once you deduct the liabilities, what you are left with should cover your living expenses, your savings, and the mortgage you about to get.
Again, calculate the living expenses and add the amount you are putting aside towards savings. The amount you now have in front of you is how much mortgage you can afford to pay at the present moment. Try to stay within those limits and if that gets you anywhere, good, you are ready to buy a house and now you have a rough idea of how much you can spend.
Start saving for a down payment
Putting aside a part of your income towards the down-payment-fund is something you can also start doing the moment you decide you want to buy a house. After you have calculated how much mortgage you can afford and consequently, which price range you are looking at, calculate the most probable amount of down payment. An average down payment which does not require mortgage insurance is 20% of the total amount you are borrowing.
Look into different mortgage deals
From my experience, laypeople generally find it quite difficult to understand mortgages and everything they involve. You can get a mortgage with an adjustable interest rate which means that the interest rate is changed periodically to protect lenders as they depend on the index of the costs of borrowing on the credit markets.
On the other side, there are fixed-rate mortgages, generally, preferred by mortgagors. While, reportedly, people use the period of 30 years to pay off their debt, it can be as short as 5 years. Luckily for all of those who do not really understand and cannot get to the actual amounts based on explanations, banks usually have examples of mortgages and fees incurred, including the monthly payments and the interest rates.
If you are looking for something out of the average presented in the example, there are mortgage calculators you can use to calculate the total expenses and the monthly installments. When it comes to the fees mentioned, they are the fees included in the processing of your request and are usually assigned to administration, pulling credit score records as well as a home appraisal.
Get a pre-approval
If you have your mind set on buying a house, a pre-approval will ensure that you have the funds to do so the moment you decide you have found the right one. If you only apply for the mortgage at the point you found the right home for you and your family, you risk losing it over someone else who was quicker and better prepared than you. Once you have found the best institution with the terms which suit you the best.
Where to go from there?
With everything ready and money basically in your pocket, you are ready to start looking for a house. Read reviews and ask for references in order to find the most reputable and trustworthy realtor in your area.
Present your case exactly as it is and do not let them steer you out of your way or spend more than you intended to. Once you find the right home, request the home inspection. You need to find out whether there are any major issues and whether the house is worth the money you are about to spend on it and once you are in, invest in it.
Buy your first house only if you are truly determined on living in it for, at least, several years. With the current fluctuations in the market, you cannot really know how well you will be able to sell it, even if you sold it straight away. It may seem like an adventure at first, but buying a house takes effort and you only get to enjoy it after months of hard work and adjusting.