Looking to buy your first home? It’s an exciting project. To get your dream home, and the best deal financially, it’s essential to pay attention to each step of the process. Follow these 7 tips to help you.
1. Pay off your debts
A great credit score can get you the best mortgage deal. It will also free up cash for your move, as well as furniture and home improvement purchases.
2. Work out how much you can afford
There are many ways to calculate the right size of mortgage for you, but a typical breakdown is the 28%/36% rule. This suggests that your mortgage and other payments related to your home shouldn’t account for more than 28% of your gross monthly income. Also, you shouldn’t need to allocate more than 36% to your total debts, taking into account your mortgage, and all other loan repayments. This will help you stick to a manageable budget.
3. Save a down payment
The larger your deposit, the more freedom you’ll have to choose which type of mortgage is best for you. For first-time buyers, with a great credit score, lenders may require as little as 3.5%. So, as the down payment on a $200,000 home will be anything upwards of $6,000, start an automatic savings plan, and work out how long it will take you to reach your goal.
4. Get your mortgage pre-approved
It gives you far more credibility with realtors and sellers. You’ll be in a stronger position than other potential buyers who are involved in a chain, as you’ll be able to make a cash offer.
5. Save for closing costs
You’ll need to cover closing costs of between 3% and 6% of the total mortgage value. For a $200,000 home, this could be between $6000 and $12,000. There will also be additional expenses, such as a home inspection. Reduce these by asking the seller to pay a proportion.
6. Launch your home search
With your finance in place, it’s time to start your search. Once you’ve identified a neighborhood with the best fit for your current (and future) lifestyle, it’s time to approach local realtors who really understand the local market. Don’t be afraid to consider homes 10%-20% over your budget: owners often price with the expectation that they’ll be negotiated down. Inspection results can be used to reduce the price. An inspection will identify any structural issues or problems with the HVAC systems.
Don’t be pressured into exceeding your budget. Walk away if you have to, there’ll be another dream home around the corner.
Keep your eyes open for bank-owned or repossessed properties as these can be obtained, either at auction or eve pre-auction, a
7. Think long-term
A long-term perspective is often neglected but can save you thousands in costs over the years. Think 7-10 years ahead and consider how your chosen home will fit your needs as your family and lifestyle changes. Will you have a growing family to accommodate? Will your kids have left home in the next few years, leaving you with a property that’s far too large? Buying with this in mind, so you won’t need to move every few years.