Buying Your First Home? Here are 5 Tips to Getting Prepared Financially

new-home-2095489_640Purchasing your first home is one of life’s most exciting times, but it can also feel overwhelming – especially if you are ill prepared. A “learn as you go” mentality will simply not work when buying a home, since what looks like a small setback or surprise can easily end up costing you thousands down the line.

To keep your costs at a reasonable level, many first-time home buyers convince themselves that they will simply stay within a budget. However, there are many factors involved in purchasing a home, making it difficult to go ahead without in-depth planning. With that said, here are five tips you should implement to prepare yourself to staying within your buying budget.

Focus on Your Credit Rating

Before you even go on the market looking for a house and shopping for a mortgage, know your credit score. To get the best possible loan rates, you need a credit score of at least 740 and higher. Learning your credit rating early gives you an opportunity to improve its rating before looking at potential homes.

One way to improve credit rating is by paying down debt and paying any bills you have on time. This may even involve postponing your house hunt, but purchasing a home six months down the line is a reasonable enough sacrifice to get a better mortgage rate.

Educate Yourself on How to Compare Loans

Before choosing a loan product, you have to learn about its features and terms that are likely to have a big impact on the cost of buying a home. This includes ways of going without Private Mortgage Insurance (PMI), researching home loan or mortgage refinancing and looking for ways of reducing fees such as property taxes. Reading a detailed review on available loan products such as Prosper Personal loan review is a great way of becoming familiar with some of the most critical aspects of comparing loans and mortgages.

Eliminate Your Debt

If you are not in the housing market and you have debt, it is best that you postpone house hunting until most or all of your debt is settled. Debt makes it harder for you to pay the required down payment on a house, and may also affect your mortgage rate terms. When you are debt-free, you stand a better chance of getting better mortgage and loan rates.

Your Loan Amount is NOT Your Spending Amount

It is important you understand that just because a lender or banker has pre-approved you for a $500,000 loan, does not mean that you may buy a $500,000 home. There are several factors that you need to consider when dealing with your budget – including closing costs and monthly payments. Do not let an inflated pre-approved loan amount sway you into purchasing a home that is more expensive than you can afford.

To find out what you can afford, review your monthly expenses and income, and estimate how much you can afford to make as a monthly loan payment. Next, use a mortgage calculator to determine what amount to spend on your new home.

Maintain a House Emergency Fund

The biggest difference between owning and renting a home is that you, the homeowner, is now responsible for any upkeep and repairs. It is advisable to keep some amount of cash aside for house emergencies. Such emergencies include a broken furnace, a leaking roof or buying a new appliance.

As a first-time home buyer, there is more than browsing real estate listings and getting together a down payment to making that move from a renter to homeowner. One of the first things you should do is prepare a budget for this big financial event in your life. Make the experience an enjoyable journey by following the tips above.

Save More Money in 2018

Coins 1523383 1920

Subscribe and join the worldwide 52-week money challenge! Get the tools you need right to your inbox.

We won't send you spam. Unsubscribe at any time. Powered by ConvertKit

Share this post:

Recent Posts

Leave a Comment

*

Valentine's Day gifts that won't destroy your budget

Valentine’s Day Crafts Are Romantic Rescue from Crazy Inflation

Fall for the hype this week and you’re out an average of $143.56 for Valentine’s Day. Crafts and other do-it-yourself tactics... more →

Ultimate Guide to Bitcoin — FREE Ebook!

Have we got something for you: a free ebook about bitcoin! more →
Get a flu vaccine.

Why You Need To Get a Flu Vaccine Right Now

Flu vaccines aren’t just for the elderly  anymore. Here are 25 reasons you should go get vaccinated. more →
Financially successful

Acquire the Trait All Financially Successful People Have

Financially successful people tend to all have a lot of self-discipline. Improving your discipline in one area of your life often spills... more →

What’s the Best Free Recipe App?

The Apple Store and Google Play together offer more digital cookbooks than you probably have room for on your mobile device. So which... more →
New tax law might slow down housing market.

What Will the New Tax Law Do to the Housing Market?

The new tax law will have a profound impact on the housing market, although in ways that go beyond the deductibility of mortgage interest... more →

4 in 5 Households Will Get a Tax Cut in 2018

Four out of five U.S. households will get a tax cut as a result of the legislation that President Donald Trump signed into law today. more →
Will bitcoin reach $100,000?

When Will Bitcoin Reach $100,000?

Bitcoin has accelerated its pace of appreciation in recent months, and if the current levels between $15,000 and $19,000 make you itch... more →
The Dow Jones topped 24,000 -- now what?

The Dow Jones Crossed the 24,000 Threshold. Now What?

Stocks appear to be increasing in volatility, yet the markets closed on Monday, December 4 with the Dow Jones Industrial Average is... more →
Peer mortgage

Should You Get a Peer-to-Peer Mortgage?

If you can’t get approved for a home loan from a bank, you might want to look into applying for a peer-to-peer mortgage. more →
Investment gifting is awesome.

4 Things To Know Before You Donate an Investment

While donations of any kind are appreciated, gifting investments benefits both the giver and the receiver. Here are four key things... more →
Are you wondering: What's the Relationship Between the Stock Market and Federal Debt?

What’s the Relationship Between the Stock Market and Federal Debt?

Wouldn’t it be wonderful if gains in the stock market could actually reduce U.S. government indebtedness? If that were true,... more →
The Business of Blogging

The Business of Blogging ‘Three Pointers’ | Take One

Three Pointers photo compliments of The Washington Post This is the first edition of ‘three pointers’, which is my attempt... more →