Every one of us has a bucket list of goals and milestones to achieve. Purchasing our very first home puts us in a mixed emotional state. It could be exciting for us, yet we can’t ignore the fact that it can be overwhelming at times.
Home-ownership comes with great responsibility as we settle our obligations however, having the right preparations and resources makes us at ease and could prove rewarding for you.
Here are the top 7 life lessons from home buyers who have gone through and wish they did it earlier.
#1 Mortgage Pre-Approval
Looking at an overview of your financial capacity and money allocation for a purchase price would give you an edge for the coming mortgage amount. You could know how much you could afford for a mortgage payment and receive an estimated maximum amount for a mortgage loan from mortgage lenders. It also shows the seller that you are a serious buyer which will put you at a significant advantage and is a great way to get ahead in a competitive market.
While you may be approved to buy the house you want, the house you want to buy may not. Before you get emotionally attached to a beautiful house, the lender must pre-approve the property. Get a lender to run your numbers instead of some online calculator to ensure that you undergo the real pre-approval process.
The process requires detailed attention of the lender and will depend on your credit score, comprehensive analysis of your income, and the nature of your down payment.
When you have a better basis for comparison it will ensure you’re getting a good deal and the lowest interest rate possible, you could also talk to multiple lenders as well. However, you have to be careful applying as this can negatively affect your credit score.
#2 Distinguish Amount Required to Buy a House
One thing that can be crucial along the process is not setting a budget. Not having a budget in place could end up your shopping out of your price range.
The amount should be realistic. Keep in mind that the lender’s approved amount is for the home itself. It doesn’t necessarily mean that you can afford the monthly payment and it may not include the other fees such as the following:
Interest – This is what the lender charges you for the loan. The interest rate may vary depending on your credit score, the type of loan you get, your lender, and the term of the loan.
PMI – For some lenders, it is required to pay mortgage default insurance like Private Mortgage Insurance (PMI) if you don’t put at least 20% down payment on the house. This serves as the lender’s protection in case you repudiate your loan.
Escrow – The lender will charge you a certain amount which will be kept in the account to use for property tax and insurance payment each year.
Determining the amount required to buy a home is not just based on a monthly mortgage payment. You have to consider other expenses like closing cost, homeowner insurance, property tax, hazard insurance, monthly living expenses like groceries, gas, utilities, repairs and maintenance.
#3 Avoid ‘MOFO’ Attitude
According to Butler, buying decisions can’t only be based on the fear of missing out or FOMO. First-time hopeful buyers usually have the mindset of buying a home because of the fear of being shut out of the market forever.
This mindset could put you in trouble if anything goes wrong financially. You have to avoid getting into a home-buying deal with thin margins.
#4 Future proof Financial Decisions
In buying a home, you also have to consider what the future holds. That is to assess the financial setup that you will be comfortable with now and for the following years.
How stable is your income and career? If you or your wife decides to stay home or if an unexpected turn of events happened like a global pandemic? The accessibility of your existing home needs to be acknowledged as time goes by.
For your future, you want to get into a situation you can enjoy not only now but as your life inescapably changes over time.
#5 Never Hesitate to Ask for Help
If you experience being overwhelmed with a lot of paperwork and legal jargon, enlist the help of professionals. This is to make sure that you’re doing everything right legally and financially.
Best financial advisors are widely known to have helped first time home buyers especially in knowing their numbers. Mortgage Broker, on the other hand, brings you to the right lender.
#6 Down payment Ready
Part of the common home buyers plan is to get the down payment ready. You may be able to avoid default mortgage insurance if you can come up with at least 20% down payment.
Although your down payment will depend on the type of mortgage you choose and the lender, saving at least 20% or more is recommended as it won’t require you to pay Private Mortgage Insurance which serves as the lender’s protection in case you can’t make your payments.
#7 Get a last will and testament
Living life has its own uncertainties and unpredictable events. Protecting and securing your home for years to come especially including your loved ones, should be our top priority and of utmost importance.
After investing so much effort, money, and time on your property or home, It could benefit your family financially and avoid potential arguments that may arise in case if you were to pass away. It ensures your asset and financial value to be passed on to your beneficiaries that could help them in any way presently and emergency needs.
Not having a will could significantly affect your beneficiaries financially. You’ll be on an “intestate” after you passed away and the government will take intestacy estate law actions to disperse your estate. This process could be expensive, stressful, and takes plenty of time to settle.
Purchasing your first home might be one of the largest deals you’ll ever enter into this point in your life. It can be overwhelming. However, by understanding and following the whole process you will be able to overcome common mistakes and even save money during the process.