Wednesday, March 5, 2014
Buying a home, especially if it’s your first time, is one of the most important and biggest decisions you’ll ever make in your life. Several factors need to be considered before proceeding with the purchase because it involves more than just simply handing out payment for the property - it’s more about establishing a long-term commitment to yourself, your family, a property, and to the community.
1. Market knowledge & working budget – In order to find the perfect house and lot, it’s important to do your own research regarding how much listed properties are being sold for in your chosen area or in different neighborhoods. But of course, always keep your working budget in mind to avoid paying more than you’ve bargained for.
2. Money-on-hand for down payment & closing costs – Down payments for homes typically go from three to 20 percent of the total value, depending on your mortgage plan or if you've opted to go with a private mortgage insurance or have taken out a loan with a higher interest. Nevertheless, it’s best to have enough money equivalent to 20 percent as well as an additional three to six percent for the closing rates.
3. Emergency fund – Being able to buy a house goes beyond having enough money to cover the down payment and closing costs. It’s also of crucial importance to have enough funds to cover certain additional expenses such as property taxes, initial repairs, utility bills, and other emergency payables.
4. Can think & commit long term – Buying a house wouldn’t make sense if you weren't able to commit to it for at least three to five years. This is where the emotional component of buying your own home comes in, because in as much as there is freedom in owning a house, there are also a lot of responsibilities and challenges. Do make sure that you're ready to commit to it for the long haul otherwise, renting may be the better option.
5. Controlled debt & good credit reports – Setting your finances in check isn’t done just to get potential lenders to approve your mortgage. It’s also to prevent having additional financial stress in the future. So if you’re still drowning in outstanding debt or other big purchases and expenses, you’re not only lessening your chances of getting a mortgage, with lower monthly payments, but you’re also setting yourself up for years of possible financial struggle.