If you’ve never owned property before, then the challenge of buying a home can be so daunting that it causes many people to either jump on the first offer that they have, or simply carry on renting and put it off for another few years. Although buying a home isn’t as simple as running out to get milk, it’s certainly not an impossible task. If you’re finding the whole thing overwhelming, here are some smart financial moves for buying your first home.
Get Pre-Approved
This is one of the most basic smart financial moves you need to make as a first-time homebuyer, and should come at the very top of your “to do” list. A lot of real estate agents won’t even consider working with you unless you get pre-approved for a mortgage. The one thing you don’t want to do is to start the house-hunting process, and fall madly in love with a home that you can’t afford. Aside from that, there may be issues with your credit that you’ve been unaware of so far. Aside from your personal credit, your income and your down payment are going to be scrutinized before you get approved for a mortgage. It may take some doing, but getting pre-approved is an essential first step for the road ahead.
Shoot for a 20% Down Payment
Your down payment should be at least 5% of the overall price of your mortgage. Having said that, it’s highly recommended that your first-time down payment should be 20% of the value of the home, in order to maximize your chances of qualifying for a conventional mortgage. If you have enough money in a retirement plan, you can borrow from it to help with the down payment. It’s also pretty essential to remember that the amount you’ve saved for a down payment isn’t always going to be the amount you end up using. I understand that you may be desperate to stop renting and finally move into your own home, but take the time to save up a cash cushion to cover things like closing costs, repairs, furniture, and other things that you could need when you first move in.
Choose Home Insurance Wisely
Buying property is likely to be the biggest financial transaction you’ll ever make, so obviously you’re going to want to protect your investment with insurance, via companies such as Belairdirect. However, just like the home itself, it’s essential that you take your time shopping around, and pinning down the policy that’s right for you and your family. When looking at mortgages, there’s a pretty big chance that your brokers tried to get you to buy home insurance that’s tied to the mortgage. If you go along with one of these packages, you may find out later that the insurance is a lot more than you could have got if you scoured the market yourself and got insured through an individual broker. Another big thing to watch out for is annual increases. Most policies will increase year on year according to re-build costs, so take this into account before settling.
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