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Your First Home Loan
Purchasing your first home is an important and daunting event. This is a financial commitment that can easily last for 30 years of your life so you should spend quite a bit of time with it.
First, there are several important questions you should ask yourself as a homebuyer. Consider how long you plan on living in the house. Usually it needs to be at least 3 or 4 years for you not to lose money. A general rule of thumb is that houses appreciated 5% each year so think about how long you’ll need to stay there without it costing you more than necessary. So if you think you’ll need to move soon for personal or business reasons you could end up paying for the privilege of owning a home.
Also think about how long the house will meet your needs. Are you planning on starting a family soon? A house that fits your lifestyle now may not in 5 years so plan ahead. Look into housing plans and how they could be changed to fit your needs. If you are single, or a couple without children, think about how much room your potential house has to grow. Are there extra rooms like an office or den that can be modified to fit another need?
Then there is your own financial health. How is your credit rating and score? What are you financial obligations? Determining these things can help you figure out what you can afford for monthly mortgage payments. Perhaps it isn’t the best time to buy a house because you need to raise your credit score. Taking a few months to do so can reward you with a lower interest rate, saving a lot of money over the lifetime of the loan. Also if there are any errors on your credit report it’s better to find and fix them before applying for a mortgage.
Checking your personal financial situation will also help you determine where the money you’ll need for a down payment can come from. You can also use this to help determine your closing costs and how you’ll pay for them and similar fees.
Finally, realize the continuous cost of owning a home and factor that into your decision. These include maintenance, taxes, insurance and improvements among other things. Occasionally you may also have to pay Home Owners Association fees. If these are a problem talk to your lender and realtor to see how you can lower or possibly avoid them.
All in all, buying your first home should be exciting and as stress-free as possible. Educating yourself about what kind of house you can afford will help make that a reality.
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