Buying your own home is an exciting event, but it is also nerve-wracking. For home ownership to be a success, you need to do things right, and planning starts well before you actually sign on the dotted line.
As you start getting ready for home ownership, think about these three key areas.
When you are getting ready for home ownership you need to think, not only about the costs of actually buying the house, but also the on-going costs of owning it.
The biggest costs are the down payment and closing costs. You could buy a house with a down payment of as little as five percent, but remember the less you put down, the bigger your mortgage repayments will be. You might also find that with a small down payment you will have to take out mortgage insurance. If you can, start saving well in advance so you have enough money for a down payment of at least 20%. Closing costs are all those extra things involved in buying a house such as the fees you have to pay to get a mortgage, attorney’s fees and a home appraisal. On their own these may not cost much, but it can soon add up to a significant amount on top of the cost of your house.
Many people come unstuck when trying to manage the on-going costs. When you are getting ready for home ownership, budget based on things such as mortgage repayments and utility bills and make sure you can cover everything as well as having something left over for emergencies.
2. Credit score
If you want a mortgage with a decent interest rate then having a good credit score is a must.
There are companies who will provide a free credit report, so as you are getting ready for home ownership, be sure to find out your current credit score.
If it is bad, then you can try to improve it. Making repayments on time, keeping your debt as low as possible, and keeping older accounts active to show stability can all improve your credit score.
3. Your potential house
When you are getting ready for home ownership it is important to think about your priorities for a house and what you might be willing to compromise on. If you will be sharing, discuss the priorities with your co-owners to make sure you are both heading in the same direction.
If you know your budget, get an idea of what you can afford so you don’t waste time looking at unrealistic properties later on.
It pays to start getting ready for home ownership well in advance, so the house buying process is smoother and less stressful.