Buying a home is an adventure and gamble at the same time. It’s a very complex process that will only deemed successful if you take the right steps. If you’ve got the plan of finally purchasing your first home, there are things you need to secure first, the purpose of which is to achieve and ensure success in the biggest investment in life.
In this website called TheSimpleDollar.com, two things we believe are quite important for you to consider when you finally arrive at the decision. See them below, in the article titled “Four Atypical Things to Do Before Buying a House” by Trent Hamm.
1. Save a significant amount each month for at least two years.
A mortgage payment requires financial discipline as well as enough money, period. Can you cover the mortgage? The insurance? The taxes? The constant expenses that go with home ownership?
Use a mortgage calculator to figure up what your monthly mortgage payment will be. Tack 50% on top of that for insurance, taxes, and other expenses. Subtract your current monthly rent payment from that.
If you can’t save that amount each month, then you’re not ready to buy a house of that size.
2. Sell off all of your stuff that you don’t use.
The less stuff you have, the less space you need. The less space you need, the smaller house you need. The smaller house you need, the more likely it is that you’ll be able to afford that house.
Go through your closest. Pare down. Get rid of stuff that you don’t use.
If you sell off a lot of your stuff that you don’t use, you’ll not only realize you don’t need as much space as you thought you did, but you’ll also find that you suddenly have some cash in hand that can help you move towards actually owning a house.
Even better: the less stuff you have, the easier (and less costly) it is to move.
I’m not arguing on behalf of selling off stuff that has value to you. I only suggest that you go through your closets and cupboards and get rid of the stuff that you don’t use. It’s just sitting there taking up space, convincing you that you need more living space, when in fact it could be money in your pocket and freedom in your life.
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One of the biggest reasons why buying a home requires a long term plan is because you’ll need to save for it. It does not mean you just get up one morning and put in all your savings for the down payment. The coolest thing you can do is save money for say, two years and after that you’ll be more financially stable to get that house you dream of.
According to HGTV.com, it is also very important that you ask the essential questions to yourself before you decide to move on and proceed with the plan. A lot of potential home buyers dream big but when they ask these two questions, they eventually realize they’re not there yet.
Can I afford it?
Buying a house will have a significant impact on your finances, so make sure you can handle it.
Housing is more affordable than ever and incentives like low interest rates and the new expanded tax credit are enticing buyers to enter the market. But purchasing property involves a lot of upfront costs: closing costs, down payment, new furniture, moving expenses. Do you have enough cash?
Create a budget for the monthly mortgage payment and homeownership costs, such as general maintenance if you buy a single-family home or homeowners association fees if you buy a condo.
Am I mortgage-worthy?
Say you saved enough cash, but what about your credit? It’s not a secret that getting a mortgage these days is harder than it used to be. Lenders are looking closely at all documentation of your income, debts, assets and liabilities, to make sure you don’t exceed the maximum debt-to-income ratio. And when it comes to credit scores, the most competitive interest rates (the 5 percent you may have heard about) only go to buyers with credit scores above 700.
The key is to review your financial situation before you check out open houses. Use our affordability calculator to see what kind of monthly mortgage payment you can comfortably afford.
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Those two questions above are probably the most pressing questions you need to answer. There is no way to purchase a home when you know within yourself that you cannot afford it. It’s just impractical and won’t make any sense.
Lastly, LifeHacker.com, in its blog post titled “Top 10 Things You Need to Know Before You Buy a Home,” the writer Melanie Pinola talked about three things that most prospective home buyers don’t usually think about or consider, but are actually very crucial in the entire process of home buying.
Look Out for Deal Breakers
In addition to having your own “must have and want” checklist when buying a home, put these six potential deal-breakers on your need-to-know list: a roof that needs replacing, a home in a high-risk flood zone, issues with sewer lines and other plumbing, restrictive local zoning rules for home improvements, an electrical system that needs updating. You can request a CLUE Report on the home to see every insurance claim made on the home in the last several years, and, in some states, sellers are required by law to disclose any home damage or repairs done. Besides that, while walking through the home, look past attractive finishes like high-end countertops and look for signs of possible big problems, things like cracks in the foundation or water stains on the ceilings or walls.
Buy Less House Than You Can Afford
Many online calculators tell you how much you can afford, based on your current income and debts. It’s best if you can aim for a house even less than what the calculators tell you so you don’t end up house poor. Financial Samurai suggests a 30/30 rule—having the 20% down payment and a 10% buffer in savings and your mortgage less than 30 percent of your gross income. This chart shows the minimum salary you’d need to afford a home in 27 cities. If it doesn’t look like you can afford a home based on these guidelines, look into homebuying programs in your state that provide financial assistance to new homebuyers.
Take Your Time
When you’re looking for a new home to buy, it can feel like you’re pressed to make an offer on any home you’re interested in right now. Relax and take your time shopping around for this major move until you find the home that you’ll love living in for years to come. Shop around for mortgages too, as well as homeowners insurance. When you’ve found the home of your dreams, but it’s already under contract, you can still make a backup offer on that home.
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One of the most critical mistakes a potential home buyer like you can make is making hurried decisions. Keep in mind that purchasing a home is not like getting a used car or buying stuff at a hardware store. You need to give yourself time to contemplate on your options. Once you make a crucial mistake, you realize you can no longer turn back.