Have you made the life-changing decision to purchase a home? Before you start attending open houses, take a few moments to make sure that you have all of your ducks in a row. By doing so, you are able to make an informed home buying decision.
1. Get pre-approved for a mortgage.
Though securing financing for your home isn't nearly as fun as searching for your new abode, it is an essential step in the home buying process. When you get pre-approved for a loan, your lender uses your financial information to determine how much the bank will lend you. Factors taken into account include your income, your down payment, and your credit history.
By getting pre-approved, you are able to present a more attractive offer to potential sellers. Buyers who have already secured financing are a safer option than those who have not. Some realtors will not even accept offers from buyers lacking a mortgage pre-approval.
2. Figure out how much you can actually afford.
Once you know how much the bank will lend you, you may think that you can safely purchase a home that costs the full amount of your pre-approval. This is a common fallacy; instead, it is vital for you to sit down and create a realistic budget to see what mortgage payment is reasonable for your expenses. Don't forget to consider additional expenses of home ownership, such as maintenance, real estate taxes, and homeowner's insurance.
When looking at your budget, consider future changes in your income and expenses as well. Are you thinking of starting a family? Make sure to calculate potential costs for daycare. Do you intend to stay at home with your children at some point? Consider homes that are affordable on just your partner's income.
3. Save for overlooked home buying expenses.
You know that you need funds for a down payment and closing costs for your new real estate. However, don't forget to save for all of the other expenses associated with buying and moving into a new home.
Moving expenses and utility deposits are two common items that are often unavoidable. More flexible expenses include basic home items, such as trash cans, draperies or blinds, and new locks for the home. Depending on your current household inventory, you may also need to purchase items such as furniture, linens, paper products (toilet paper and paper towels), and cleaning supplies. A healthy savings account provides you with the funds to purchase these items.
If you are anxious to call your realtor and star looking for your new home, just wait a moment! Before perusing a list of homes for sale, you need to take a few steps to prepare for home ownership. With a little preparation, you can make sure you are financially prepared to purchase a home.