You have hit a major milestone in life. You’re ready to get out there and buy your first home. It’s a big step in adulthood. Making this decision means you are ready to settle down in a home of your own. No one else will be paying the bills anymore. Before you take the plunge, take some financial advice to smooth your path to homeownership.
Save Your Pennies
Buying a home is going to be a substantial expense. It will mean committing to a loan for fifteen to thirty years. If you decide to move early in the term of your loan, you may have a hard time selling it at a price that is high enough to cover the cost of your mortgage. The best thing you can do to help yourself is to have money in the bank or assets that can be converted into funds when you are in need.
A wise bit of advice is to always pay yourself before you pay anyone else. When you get your paycheck, set aside at least 20% in your savings account. Live within your means. Be thrifty. Once you have accumulated a nest egg, you’ll be ready for costs like a down payment, inspection, and any other out-of-pocket fees. Don’t forget moving day. Unless you have plenty of people to help, you’ll want to hire a reliable moving company to take care of all of the big items.
You need to pay attention to your credit score. Credit can really be a Catch-22. You need to have credit to get more credit, which can be difficult for young adults just getting out in the world.
Open up one or two credit cards to begin building credit. Pay off your balance on a monthly basis to show you are a responsible consumer. Purchasing or leasing a vehicle can also help you to have a strong credit score. It’s best to have a score of 700 or more to get a lower interest rate on your mortgage. Higher credit scores will open more doors when you are scoping out lenders.
Choose a Price Tag You Can Afford
It’s easy to fall head over heels in love with a prospective home. The property and the interior can take your breath away. If you’re not careful, you could sign up for a mortgage that doesn’t fit your budget. As you estimate monthly mortgage payments, you need to think of the big picture. How much are your utilities going to cost?
How will your annual taxes affect your payment? Will you have any fees for a homeowner’s association? You will also have your regular bills that need to be paid. List all of your monthly expenses. Look at how much money you have going in every month. How much money can go out? You’ll still want to set aside money in your savings account if you ever have a rainy day.
Don’t Be Afraid to Shop Around
They say you should never go with the first car you drive when you are shopping for a vehicle. The same holds true when you are looking for a lender. Research your options. Ask for estimates from at least three different lenders for a home that catches your eye.
Don’t overlook local banks, credit unions, and mortgage companies. You may be surprised to get the best deal from the small lender who supports the community. First impressions are important. Pay attention to how you are treated by representatives, prompt responses, and the atmosphere when you meet with lenders in person. Trust your instincts if they tell you to move on
Find Out What Type of Mortgage Programs are Available for You
Mortgage programs are not one-size-fits-all. You may be able to get a lower monthly payment if you meet specific qualifications. For example, a USDA home loan could be the best fit for you if you are considering a home in a rural location.
This type of loan is backed by the Department of Agriculture in the United States. You may not even have to put money down when you purchase your home. CalVet loans are available for veterans in the US armed forces. Other mortgage programs are tailored for individuals with a lower income. Search for a program that makes homeownership possible for you.
If you have always been good about putting money in the bank, you are well on your way to buying a home. Healthy finances and a strong credit score will give you more bargaining power in the end. Plan ahead so you can start searching for your first home.