Being a first-time homebuyer can be an exciting proposition, but excitement shouldn’t be the only emotion you feel. Fear is also necessary because it can keep you on your toes, which matters before making one of the biggest decisions of your life.
A house is a big-ticket purchase that you can probably buy only by taking out a loan that’s payable in at least 15 years. Routine maintenance is an incidental responsibility that comes with home ownership. The level of upkeep your property needs depends on many things, but it will be a long-term, recurring expense. To avoid digging a deep financial hole for yourself and pick a house that makes sense for your situation, heed the pieces of advice below:
1. Know What You Can Afford
Before you seriously shop around, get pre-qualified or pre-approved. Either measure can reveal how much money reliable lenders, such as PRMI Texas, will be willing to loan you. Pre-qualification and pre-approval involve an overview of your finances, but the latter involves greater scrutiny. When you get pre-approved, a lender will verify your income, assets, and debts and perform a hard inquiry, which will affect your credit score. Pre-approval, on the other hand, can give you more assurance than pre-qualification does, but you’ll only do it when you’re ready to move forward to avoid ruining your creditworthiness.
2. Don’t Confuse a Starter Home With a Forever Home
Houses for sale are not equal and are not for everyone. Normally, a first-time buyer chooses a starter home, which is less costly and smaller, and then decide to move to a bigger one later on. On the other hand, a forever home is a property you intend to retire in.
Generally, a forever home can help you skip two rounds of closing cost and commission payments because you just need to move once. This property can be practical only when you can afford it and when you really don’t change addresses down the road.
Look far into the future, and imagine where you’ll be in life five to 10 years from now. Without forgetting about your budget, pick between a starter home and a forever home with foresight.
3. Save Up Early
You’ll be hard-pressed to find a lender who will agree to provide 100% financing. But even if you meet one, don’t borrow everything you need to buy the house you like. Doing so is a gamble. Many things can happen between now and then. What if you lose your job or the land values in your location drop?
Losing your capacity to repay your loan and experiencing significant property depreciation can sink your mortgage under water because you have enough equity to build on, to begin with. In other words, you may lose your house to foreclosure should your financial situation changes for the worse. Generally, the lowest down payment you need to produce is 3% of the property’s purchase price. However, it’s better to put down as much money as you can to lower your risk as a mortgage borrower and a homeowner in case your life or the economy turns sour.
Owning a house is a heavy, long-term obligation. It provides a sense of pride, but, at the same time, it should put pressure on you. If it doesn’t, even just a little, then you should probably exert more effort to look at it seriously.