It is a proud moment in a person’s life to buy their first home. This is an investment that should be taken very seriously, as it involves a long process. During this time, there are many things to remember before closing the deal. The following are ten tips for purchasing a home:
Buy for the Long Run
It is important to assume that you will live in the home you purchase for at least five years. The Zillow Group Consumer Housing Trends Report of 2017 stated that most Americans who sold their home the year prior lived there for at least ten years before they sold.
Buy to Improve Your Life
A home is a large part of a person’s life. It is where they make memories, entertain company, and raise a family. It is because of this that it is important to pick a house that serves your needs, not one that is believed to have a short-term financial return.
Focus on What is Important to You
When the process of house searching begins, it can help to make a list of necessities. This ensures you know what you want out of your house and neighborhood and do not become distracted by unnecessary features.
Set a Budget
It is easy to get excited and want to go over budget when buying a house in today’s competitive market. By setting a solid budget, you are aware of what you can afford and how far you can stretch if necessary.
Aim for a 20% Down Payment
Ideally, buyers want to be able to afford a 20% down payment. Those who do not must pay a premium, commonly in the form of a private mortgage insurance. A higher down payment also can reduce your financial risk.
Keep a 6 Month Strategic Reserve
It is important to set up a strategic reserve from a regular bank account that covers about six months of living expenses. This provides assistance if you become suddenly ill, are faced with unexpected expenses, or lose a job.
Pre-approval proves to sellers that you are a reliable buyer with good finances. This requires buyers to organize paperwork documenting their income, debt, and credit.
Shop Around for a Mortgage
Often times, those taking out a loan on a home do not browse for their best option. Not all home loans suit everyone. There are different types of mortgages, which is why it is important to shop around for the one that is right for your financial situation.
Do Not Spend More than a Third of Your After-Tax Income
Certain homes are more expensive depending on the area they are in. When buying a house, it is a good rule of thumb to spend approximately one-third of your after-tax income.
Do Not Be Afraid to Walk Away
It is important to be aware of and manage your expectations when buying a house to make sure they are met before closing a deal. Do not be afraid to walk away from a deal that does not benefit you if a seller refuses to meet your terms.
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