Top Tips For Buying Your First Home

Your first step is https://loansolution.com/pawn-shops-nh/ to determine what your long-term goals are and how homeownership fits in with those goals. Perhaps you’re simply looking to transform all those “wasted” rent payments into mortgage payments that give you something tangible: equity. Or maybe you see homeownership as a sign of independence and enjoy the idea of being your own landlord. Also, buying a home can be a good investment. Narrowing down your big-picture homeownership goals will point you in the right direction. Here are six questions to consider:

1. How’s your financial health?

Before clicking through pages of online listings or falling in love with your dream home, do a serious audit of your finances. You need to be prepared for both the purchase and the ongoing expenses of a home. The outcome of this audit will tell you whether you’re ready to take this big step, or if you need to do more to prepare. Follow these steps:

Look at your savings. Don’t even consider buying a home before you have an emergency savings account with three to six months of living expenses. When you buy a home, there will be considerable up-front costs, including the down payment and closing costs. You need money put away not only for those costs but also for your emergency fund. Lenders will require it.

One of the biggest challenges is keeping your savings in an accessible, relatively safe vehicle that still provides a return so that you’re keeping up with inflation.

• If you have one to three years to realize your goal, then a certificate of deposit (CD) may be a good choice. It’s not going to make you rich, but you aren’t going to lose money, either (unless you get hit with a penalty for cashing out early). The same idea can be applied to purchasing a short-term bond or fixed-income portfolio that will not only give you some growth but also protect you from the tumultuous nature of stock markets.
• If you have six months to a year, then keep the money liquid. A high-yield savings account could be the best option. Make sure it is insured by the Federal Deposit Insurance Corporation (FDIC) (most banks are) so that if the bank goes under, you will still have access to your money up to $250,000.

Review your spending. You need to know exactly how much you’re spending every month-and where it’s going. This calculation will tell you how much you can allocate to a mortgage payment. Make sure you account for everything-utilities, food, car maintenance and payments, student debt, clothing, kids’ activities, entertainment, retirement savings, regular savings, and any miscellaneous items.

Check your credit. Generally, to qualify for a home loan, you’ll need good credit, a history of paying your bills on time, and a maximum debt-to-income (DTI) ratio of 43%. Lenders these days generally prefer to limit housing expenses (principal, interest, taxes, and homeowners insurance) to about 30% of the borrowers’ monthly gross income, though this figure can vary widely, depending on the local real estate market.

2. Which type of home will best suit your needs?

You have a number of options when purchasing a residential property: a traditional single-family home, a duplex, a townhouse, a condominium, a co-operative, or a multifamily building with two to four units. Each option has its pros and cons, depending on your homeownership goals, so you need to decide which type of property will help you reach those goals. You can save on the purchase price in any category by choosing a fixer-upper, but be forewarned: The amount of time, sweat equity, and money required to turn a fixer-upper into your dream home might be a lot more than you bargained for.