If you’re thinking about buying a new home, there’s some key information to consider before making the leap: can you afford it, what size do you need, and how much space does it have? But there are even more things to consider in the process. Here are the top five things to know before leaping into homeownership.
1. You and The Banks are Not Friends
If you can pay cash and avoid the bank, do so. But many of us don’t always have that option. In this case, it is best to go to the bank to apply for a mortgage and learn as much information as possible beforehand to avoid being taken advantage of by the banks.
Banks will usually approve you for a mortgage amount that is more than you can sensibly afford. Remember they do this based on the quote you give them, and you may not know all the little costs you have. They check your budget and find a comfortable and achievable monthly mortgage number for your current financial situation. Then use an online mortgage calculator to find the average price you’re looking for.
2. Be Ready for Financial Shocks
Owning a home is a bit more hands-on than renting. If your toilet is broken, it’s time to start reading online reviews. If property taxes rise unpredictably, it’s on you to pay or appeal.
Having the financial flexibility to deal with these unexpected events is vital. Still, you must not neglect the importance of having the emotional and mental capacity to handle them responsibly when they do occur.
3. Location Really Matters
If you’re new to the area, it’s good to start by searching online local news archives for street names and neighborhoods. Also, you don’t have to exclude certain cities completely, but a full online search can help you narrow down your choices. For example, if you are in Texas, you can contact beaumont texas real estate agents to help you find a good home.
Flooding is another concern, especially if you live near a river, lake, or coast. Get a flood map to get a rough idea of where the parts are. Again, you don’t have to rule out a home just based on this, but it can help you decide if you need to add flood insurance as an additional expense.
4. Your Down Payment May Not Be the Main Problem
Buying a home requires a significant financial commitment. There is, of course, a down payment. On average, you want to have at least 7% of the cost of your home. Then add 3% as a closing cost. It also depends on where you live and what taxes you have to pay in your city or state.
Good credit history is also important. Most borrowers will qualify for a mortgage with a minimum score of 620, but loaners will give the most competitive rates to borrowers with a 700 or more. It’s time to start building your credit score if you haven’t started practicing good credit score habits.
5. Understand That if You Can’t Afford It, You Can’t Afford It
This is the most important point of all. Can you afford to own a house? If your answer is no, you need to consider renting because if you can’t afford it, you will be in a world of hurt when your mortgage payments go up.
If you’re going to buy a home, then understand that you have to have a financial plan and be able to afford it. You will need to budget for your home purchase and evaluate whether the monthly mortgage payment is fair given your income.
