Purchasing your first home is a big step in life, and there are a lot of steps to take on the journey from beginning to end. If you are unprepared for the twists and turns of purchasing a home, you may begin feeling overwhelmed very quickly.
It is much wiser to prepare, and research some key points of home buying before you begin your search for a place to call home. Here are a few tips to get you started on your journey to financially prepare for purchasing your first home.
Thoroughly inspect your credit history/rating
Before you take any step towards purchasing your first home, you need to take a thorough inventory of your credit history/rating. Your mortgage lender is going to look at your report very closely, so it is best for you to check it out first.
It is quite common that people find things on their credit report that should not be there, and you should screen for these mishaps. Also, if you have negative infractions on your credit history, you will want to work them out before buying a house.
Start saving money for a down payment
It is best to have a down payment of at least ten percent of the purchase price of a home before you start the buying process. Most lenders will not look too thoroughly at you as a prospective borrower if you do not have a respectable down payment for the property.
If you are able to save enough money for more than ten percent, it will give you better chances at a successful purchase. Sometimes a bidding war ensues on a popular property, and a larger down payment is much more appealing to the seller.
Figure out how much you can afford to pay
Spend quality time seriously looking at your finances, and figure out how much you can really afford to pay for a home. The point is to not get in too deep when taking out a home loan. Consider the payment options associated with a 15-year mortgage versus a 30-year mortgage.
You want to keep and enjoy your home, and that is hard to do when you cannot afford the payments. As a general rule of thumb, your home loan should amount to about 20-30 percent of your annual income. Purchasing a home is a process you need to be super honest about, and be prepared to be transparent with your lender.
Talk to a mortgage brokerIf you have the funds, you may want to consider enlisting the services of a mortgage broker. A mortgage broker will help you to efficiently shop around for the most affordable lending options. It is not a necessity to get a mortgage broker, but first-time buyers may appreciate the added guidance.