Buying a home is a major step for most people. It can be very exciting to think about. However, the financial obligation and the work required to be a homeowner can be daunting. Before you buy a home, there are certain things to consider to make sure that you don’t end up in over your head.
Are You Ready?
Renting has certain advantages, like being able to call the landlord if something needs fixing. You usually aren’t responsible for the upkeep of a place, and you may have some of your utilities reduced or covered as part of your rent. When you buy your own home, this is no longer an option. If something is broken or damaged, you have to do the repairs or pay for a professional to do it. You will be responsible for all of the expenses that come with living in a home. With a rental, you can move out when the lease is up. If you want to move out of a home you own, you have to sell it, which can take months. It is important to take all of these things into consideration when you are considering buying a home.
How Much Can You Afford?
You might have your dream home in mind, but when you are buying a home, you need to make sure that you are practical as well. Very rarely can you pay cash for your home, but that doesn’t mean that you should take on a mortgage that you can’t afford. Set a budget, based on your income and your monthly expenses so you figure out how much you have to spend on a mortgage. Once you’ve done that, use a mortgage calculator to find out how much house you can afford and stick to that.
Do You Have the Down Payment?
In almost all cases, lenders want the home buyer to bring a down payment to the table. Twenty percent of the purchase price is currently considered to be ideal. However, there are lending programs which allow for 10% or less. When lenders allow a lower down payment, they will require borrowers to take out private mortgage insurance, which is an additional monthly premium payment. The lower your down payment, the more you will have to pay back in your mortgage, so it is helpful to save up as much money as you can for a down payment.
What Kind of a Mortgage Do You Have?
Mortgages come with fixed interest rates or adjustable interest rates. They come as 15-year or 30-year, with other time periods available. Loans above a certain threshold are considered jumbo loans and come with special terms and conditions. The kind of mortgage that you are able to get, and the interest rate that is attached to it, will determine a lot about whether you can buy the home that you want or not.
The better you educate yourself about buying a home, the better you will be able to deal with the process. While building your down payment up, spend your time wisely and learn as much as you can.