Buying a home is a huge decision and a major investment. Developing a budget, adjusting spending habits and evaluating and repairing credit issues are all important steps to take when planning for a new home. Following a quick checklist can help you feel confident that all your financial bases are covered.
Determine Whether to Buy or Rent
There are a lot more costs involved with owning a home than renting. Additional expenses to consider when making the decision to buy or rent are maintenance and upkeep costs, insurance payments, utilities and the mortgage itself. When renting a condo or a house, the landlord or rental company typically pays for any maintenance costs and some or all utilities. However, owning your own home means that you will have to take on these fiscal responsibilities. It’s a good idea to keep a reserve of cash to pay for the unexpected. You should be able to set aside at least three months worth of mortgage payments in case of an emergency or unexpected repair. If you can’t do this, it’s probably wise to keep renting and saving until you can. But if you have the money to spend for a property, then you may consider these miami preconstruction condos.
Determine How Much You Can Afford
This goes hand-in-hand with figuring your overall borrowing capacity, and there are a couple ways to determine this amount. You can get a quick and easy estimate by using one of the many new home calculators available on the Internet. If you do use a calculator, be sure that you’re completely honest with all the numbers that you enter. Also, you may not yet know your interest rate. Try to look at common rates within your area to get a good estimate. As a worst case scenario, guess high when entering the interest rate into a calculator – 7.5 percent is a good higher range.
The best way to determine how much house you can afford is to seek the advice of a financial advisor. They will evaluate your financial situation and figure what is best for you. It’s smart to discuss buying a home with an advisor before you even start looking. Most advisors will be able to offer you a pre-approved loan, and they will help you establish a spending plan so that you get the most out of your money.
Pay Your Debts and Fix Your Credit
According to Badcredit.org, one-third of Americans have a low credit score. But don’t worry if you fall into this fraction, you can still buy a home. A lower credit score simply means that you’ll probably see higher interest rates and may have to make a larger down-payment. With that said, it’s a good idea to take care of any outstanding debts and examine your credit report for any discrepancies or errors. Paying off loans before you buy a home will give you access to a larger cash reserve. Finding errors in your credit report will help you get the best interest rate and lowest down-payment possible.
Buying a home is what many folks dream about. As they say, “there’s no place like home”. That couldn’t be truer than when you step into your new house for the first time. Make it as wonderful as possible by having your finances in order before you buy.
