Purchasing a home is a big step for anyone. Making sure that you’ve taken the steps necessary to get everything in order is important. You don’t need to rush the process or you might make mistakes.
For many adults, buying a home is the biggest purchase they will ever make. It should be a place of refuge and not a source of major stress. Making sure you can afford the home and that you buy one that meets your needs are both essential.
Budget your money
Most individuals will have to take out a mortgage to buy a home. Since these come with monthly payments, you have to make sure that you can afford to cover them. Ideally, your household expenses will be limited to no more than 28 percent of your income. Other debts, including credit cards, should account for no more than 36 percent.
To determine what you can afford to pay for your home, you need to write out every expense and all income. Using a zero balance accounting method, which means every dollar of your income is assigned a purpose, can be beneficial since you know exactly what you are working with.
Evaluate your mortgage options
You have options when it comes to where you will get the mortgage. Check the rates that you are being offered to determine where you will go. Once you know the rates, you can look at what you can afford for your home and determine what price point is appropriate.
You can’t always go off of the maximum loan amount you can receive. Instead, look at what you can afford to pay each month.
One factor that impacts the mortgage payments you will make is your down payment. Try to put down a sizable chunk if possible. While this is a big hit to your finances at first, you will have less interest to pay and lower monthly payments.
Consider the other expenses
Homeownership comes with many expenses on top of the mortgage. In many cases, you will be responsible for paying the insurance and taxes. Some mortgages factor in an escrow account, but not all do so you should find out how your chosen lender handles this.
You also need to think about upkeep costs and similar expenses. These can add a hefty amount to what you will spend, especially if you are considering buying a fixer upper so you can get more house for your money.
Inspections, contracts and closing
Once you find the home you want and have your financing in place, you will make an offer on the home. When that is accepted, the home will be placed under contract. You will need to have the home inspected so you know the actual condition of it. If everything checks out, you can move to closing. Make sure that you know your rights and responsibilities during this phase of the process. If anything seems amiss, evaluate your legal options.