Buying a home can be challenging, especially for a first-time home buyer. The risk appetite often defines the decision-making criteria for many buyers. However, the buying process has significantly changed due to market trends and lifestyle changes.
To demystify the process to get value for your money, here is the rundown of what you need to consider before making a purchase. First and foremost, it is crucial to consider the type of residence that conforms to your taste and preferences. In addition, the choice needs to serve your needs. It is also essential to consider whether the alternative is affordable, how much financing will be required, and the people you will engage with to complete the due diligence process.
Secondly, determine the long-term goals and how home ownership fits within those goals. Before perusing through the listing pages online and falling in love with that dream home being displayed on different websites, you will be required to do an in-depth audit of your finances. It is not just about affording the property but also being able to finance the ongoing expenses of the home. The audit’s outcome will be a guideline on whether you are ready to take that bold step.
Thirdly, review your savings by ensuring you have enough caution for emergencies. Chris D Bentley advises that in most instances, ensure you set aside some emergency funds with at least three to six months of living expenses. Purchasing a house will require some upfront costs, such as down payment and closing costs which often are not reflected on the face value of the property.
It is also crucial to review your spending and cut unnecessary costs. Have strict adherence to your budget and analyze where each penny is spent and where it is going. The results will guide you on how much disposable income is available to repay the mortgage every month without too many cash flow constraints. A sound budget and actual projections need to capture everything: utilities, food, car maintenance and payments, clothing, student loan repayments, entertainment, kids’ activities, retirement savings, and salary deductions, to mention a few.
Sometimes, you may not have a lump sum amount for the purchase. As a result, you may consider applying for additional credit to complete the purchase. You will need good credit standing to qualify for a home loan. As a result, it is vital to have a rich history of timely payment of bills and a well-balanced Debt to Income ratio (often ranging at around 40%)
Last but not least, it’s essential to gauge the type of house that best suits your taste and preference. You need to decide on which type of housing best satisfies your needs. While it’s essential to have your finances intact, it’s good to retain some flexibility in some of the features to fit your needs and wants as closely as possible. Creating a clear list defining your basic desires, size and neighborhood, layout, and kitchen fitting, to mention a few are essential.