With buying your home comes a whirlwind of emotions – excitement, stress, and anxiety to name a few. You may be wondering what your first step should be when buying a home, where you should start looking, or how you should budget your finances so you’re financially stable before making the final decision. We’ve come up with a quick guide for first time home buying that covers all of the bases when purchasing your first home.
Set a Budget
This is the most important step for home buying. Once you set a budget and are able to see how much money you can realistically put down for a house, then planning the rest will be easy. Take a look at your monthly expenses and how much savings you have to give you a good idea of how much you can spend on your first home.
Pay off Your Debt
You shouldn’t have any accumulated debt before you purchase your first house! Not only will this make it difficult to pay it off in the long run, but you’re going to start accumulating mortgage debt with your new home. In order to prevent the build up of too much debt, pay off any old debt you have first. This includes credit card debt, car loans, and student loans.
Budget for a Down Payment
Save for a down payment of at least 20%. Try to avoid single digit down payments which will end up costing you more in the long run. Also try to avoid paying for Private Mortgage Insurance. PMI protects the mortgage company should you not be able to afford paying for your mortgage and losing your home. Make sure you also choose the fixed-rate conventional loan. This keeps your interest rate the same for the entire duration of the loan.
Budget for Closing Costs
Closing costs are three to four percent of the entire price of the house. With the closing costs plus the down payment, you’re looking at a hefty price to pay! Make sure you have enough saved that you can afford both and prevent any hasty decisions. It’s important to save for both the down payment and closing costs as quickly as you can. If you need to get a second job or cut costs in other areas of your life, then so be it!
Attend Open Houses
Go to as many open houses as you can, even if they’re out of your budget. That way, you can compare each house in the neighborhood to the price they’re selling for to see what the best fit is for you. Once you see what’s in the area, you’ll have a better idea of what changes you want to make to your future home.
Close the Deal!
Once you’ve done all the dirty work and chosen your home, it’s time to close. Make sure you thoroughly read everything on every single document before signing and agreeing to what’s there.
This guide for first time home buying will help things run smoothly when you decide to finally purchase your first home. With careful planning and budgeting, you’ll be able to pick and close your first house in no time – and with little hassle. Now is the time to pay off that debt and pick the home of your dreams!