As we start spring cleaning, many of us will be reflecting on what we want to achieve for this year. Last year many of our dreams were stifled due to the pandemic, hopefully that won’t be the case as we move forward. If becoming a homeowner is one of your priorities this year, here are some tips to help you achieve your goal.
Become Financially Prepared
Buying a home can be a huge undertaking, especially if it is your first. It’s important to do your homework before embarking on this adventure. To set yourself up for financial success, you should look at your debt-to-income ratio to see how much you can afford. If you have student loans, credit card debt or other forms of debt, plan to set money aside to pay for those. Though you aren’t required to have an excellent credit score, maintaining a good one will be beneficial in the long run. For a first-time homebuyer, the homebuying process can seem like there are too many fees to pay. The down payment and closing costs will be the first important expenses that you will have to prepare for. Ideally, down payments are at least 20% of the home value for a few good reasons, including avoiding mortgage insurance. There are many ways you can save for this expense. You’ll also have to account for closing costs, which are normally estimated to be between 2% to 7% of the purchase price. As an added tip, to ensure a smooth closing process, make sure to respond to communications promptly and inform your lender of any travel plans.
Budgeting for a Mortgage
Before looking for your dream home, you’ll need to figure out what you can afford. Planning to add a mortgage to your financial obligations can be overwhelming if you don’t budget correctly.
Most people know to save for a down payment and closing costs, but there are other costs to consider in the long run. As a reminder if you don’t put down a 20% down payment, you’ll likely have to pay mortgage insurance. In addition to your monthly mortgage payment, don’t forget about all your regular monthly expenses like food, taxes, utilities and entertainment.
Deciding Where to Live
Depending on your lifestyle, the style of home and where you live is different for everyone. Whether you are looking to buy a home solo, with a partner, as flip property or a multi-generational home, your home requirements will all be different. (If you’re looking for guidance to help determine what house will match your lifestyle, make sure to check it out our latest tips!) You’ll need to decide where you want to live. Do you want to move to another neighborhood, city or state? Maybe you want to be close to better schools, in walking distance from your favorite museum or just a quick drive from nature? If you want a pool, consider one with a Homeowners Association (HOA); 25% of homes in the United States are under an HOA. You could take some time to understand the basics of an HOA and to learn the pros and cons of buying into one. So, deciding on the style of home and where you want to live go hand-in-hand.
Now that you have calculated what you can afford – it’s time to start house hunting! You can start searching Zillow, Realtor.com or other websites to view prospective homes, and find a real estate agent to take you on a tour. Hopefully, you’ll find the perfect house to fit your lifestyle!
If you’re looking to buy a home, make sure to connect with one of our Loan Advisors today to guide you on the path to homeownership.