Most people dream of reaching a point in their lives where they’re ready to start thinking about buying their first home. However, wanting to get rid of the rent and start planning for your own roof isn’t as simple as many people think.
The decision-making and purchasing process takes some time and careful planning. This is why it’s essential to keep a few things in mind before embarking on this adventure.
Don’t Go for the Largest Home Possible
A common mistake some people make when choosing their home is going for something more than what they need. Yes, it’s a good idea to plan ahead in case you plan to have a family or grow your current one, but you still shouldn’t go overboard.
Go for a home that will satisfy your current needs and any potential ones in the future. This is for situations where you plan to stay there long.
Another thing to consider regarding size is monthly expenses. A larger home often means larger utility bills. You should factor this in and plan ahead because if you’re going for a mortgage option, you’ll also have that expense to think about.
Choose the Location Carefully
Another essential aspect you should consider before choosing which home to buy is the location. This can vary depending on your needs, and the options can range from the city center to something in rural areas.
There’s no right or wrong answer here as long as you’re happy with the choice you make. You should remember that the location will play a role in the price. As you can guess, homes in rural areas are cheaper, meaning you have some flexibility to get a slightly larger one.
Know How Much You Can Afford
The size of your new home is closely related to the amount you can spend on it. Aiming for a large home means you’ll need to ask for more money from a lender. If your score isn’t too good, you risk getting rejected.
This is why you should be mindful of how much you can afford. You’ll find plenty of calculators online that can estimate the monthly payment you’ll need to make. Keep in mind that different mortgages have different interest rates, which can fluctuate the price. Also, going for a mortgage with an adjustable one means the price will change twice a year. It can go up or down, and no one can say for certain which way it will go.
A Mortgage Is a Commitment
Some people tend to forget that a mortgage is a commitment. You got approved, you got your home, and your work is just getting started. For the next 30 years or however long you’ve chosen to pay it off, you’ll need to make regular monthly payments. Unfortunately, not all people seem to be able to do that regularly.
Mortgage delinquencies are more common than most people think, and some cities have quite high rates. The delinquency percentage of home loans in Phoenix, for example, is under 2%. On the other hand, New Orleans is leading the pack with over 4%.
Before you start the process, make sure you know what you’re getting into and are aware of the commitment. In most cases, missing four payments will force the lender to start the foreclosure process, meaning your home will be sold to cover the debt to the lender.
Talk to Multiple Lenders
Not all lenders offer the same conditions, so talking to multiple is a good idea. It’s like shopping—you’re looking for the best offer on the same product and going with the one that works best for you.
It’s the same with lenders. Ask for quotes from multiple lenders and see which one is your favorite. You’ll notice a slight difference in the monthly payment, which can be the deciding factor if you want to go for the lowest payment possible.
Consider the Condition of Your New Home
Unless you’re buying a freshly built home, you’ll need to consider the condition. Some sellers usually renovate their homes before selling them to ensure they make a profit out of it. This works in your favor because you don’t have to bother with the process.
On the other hand, if you’re buying a home that needs renovation or remodeling, then it’s another expense you’ll need to consider. You may have saved some money and want to utilize that for the renovation project. It’s not a terrible idea, but you should make sure you don’t spend your entire budget on this.
Spending this much drains your budget, so it's a good idea to save some for emergencies.
Some people seem to struggle with buying their first home. Yes, they buy their homes, but they don’t always make the best choices. This is why it’s important to keep several key aspects in mind when you’re planning this step in your life.
