Financial Tips for First-Time Home Buyers

Buying your first home can be an exciting experience and at the same time, overwhelming. You might have done an extensive research on the do’s and don’ts, but still get saddled with the reality on the ground.

But before making a buying decision, ask yourself these questions;

  • Am I ready to buy a house?
  • Is buying a house the best option?
  • How much do I need to buy a home?
  • Should l pay cash or get a loan?
  • Do I have enough money to make a down payment?
  • How much house can I afford?
  • How is my credit score?

Are you ready to take the plunge?

Buying a home is not something you decide overnight. It’s a huge investment, so you need to evaluate if you are financially and emotionally ready to buy a home.

Is it the best option for me?

Buying a home isn’t always better than renting. You should weigh your options first. And also remember, money isn’t the only factor that is put into consideration. Things like location, lifestyle, marital status, convenience, flexibility should also be taken into account.

How much do I need to buy a home?

The price of the house isn’t the only amount involved in the buying process. Other costs include;

  • Down payment.
  • Contingencies like Inspection and appraisal.
  • Closing costs such as title charges, settlement fees, lender fees.
  • Prepaid expenses.

Cash or loan?

Both options have pros and cons. If you decide to pay cash you won’t be tied down with monthly repayment and have a peace of mind knowing you are the owner of the house. But on the other hand, you’ll; miss an opportunity to improve your credit score, sacrifice liquidity and tie all your money in one asset.

#Tip:  To get the best mortgage rate, compare rates from multiple lenders.

How much do you have for a down payment?

If you cannot afford to pay cash, how much have you saved for the down payment of the house? Generally, the mortgage standard is a 20% down payment. If for one reason or another you can’t come up with that kind of cash, you can still buy a house with a conventional mortgage loan. But for you to qualify, you must have a steady income, a fair credit score and a realistic debt-to-income ratio.

But always remember your credit score plays a vital role on how much loan you can qualify for.

How much can you afford?

Before you start house hunting, figure out which house you can comfortably afford. This is perhaps the most important thing you should think about before making any hasty decisions. It’s also best to get pre-approved by your mortgage lender before going shopping.