Things That First-Time Homeowners Must Know. First-Time Homeowner Guidelines

Buying a home will most likely be the biggest purchase anybody is bound to make in their life. Homeownership is undeniably one of the biggest dreams for people from the world over. While the primary reason for owning a house is to give oneself a permanent place of shelter and comfort, it is also a great way to build wealth over time.

Properly built and maintained homes can bring great returns and have higher resale value – although it might not be the intention.

Just like any large project, successfully owning a home is in getting the details right all through the way. Therefore, before venturing into buying a home, one must consider, know, and understand a few guidelines.

This will help negotiate and avoid the risk factors and peacefully own a home. Here are a few first-time homeowner guidelines to help you kick start your hunt for your dream home.

Be Prepared to Borrow via Mortgage

Mortgage payment is one of the most preferred modes of owning a home. Today, your dream home may or may not be within your reach, but by assessing the amount of mortgage payment you can afford you even be able to buy more house than you need.

The amount of mortgage payment is likely to depend on the income, debt, assets, and lifestyle. Therefore, even before you begin to look for an ideal home, you must assess and determine how much mortgage payment you can afford.

Credit score also plays an important role in determining the amount of mortgage payment. A lower credit score leads to a higher rate of interest on the mortgage amount, and a higher rate of interest can considerably change the total cost of the home you want to purchase.

Eligibility Criteria

Every mortgage broker will begin with assessing how much a person can qualify to borrow. This is a very important aspect of owning a home as it helps avoid the risk of non-payment of mortgage amount or bankruptcy.

So, how much can a person qualify to borrow? A person is most likely to qualify for a maximum of 43% debt to income. This simply means that the total sum of all your debts along with mortgage payment cannot exceed 43% of your gross income.

It is not ideal to push the eligibility to 43% as you may feel house poor after paying for other expenses. The thumb rule is to keep the total housing cost below 30% of the gross income. By doing this, you can live a stress-free life for the entire repayment period of the mortgage amount.

Down Payment

Originally the standard down payment was set at 20% or more of the entire value of the home. However, first-time home buyers, in most cases, can purchase a home for a down payment of the least percentage or even without a down payment.

It is not ideal to either make a large down payment or not make one at all, because in both cases the risk of not having enough money for taxes, insurance, maintenance, repair work, etc., is high.

Based on your income, expenses, eligibility criteria, and the expert inputs of your financial advisor you can make a wise decision of how much down payment you want to make.

Begin Early Savings

By now you would have understood that owning a home is an expensive affair and by assessing the abovementioned tenets you should strategically plan to begin saving as early as possible. For instance, a down payment of as little as 5% on a $300,000 home amounts to $15,000.

This is just one example to give you a glimpse of how much you need to save for all the other expenses put together. Therefore, it is best to start saving early and to have a little more than you actually need.

Book a Home Inspection

Your decision of buying a home comes with your preparedness to pay a huge amount of money. As mentioned earlier, buying a home is an expensive affair and you most certainly would have prepared yourself both mentally and financially to invest large sums of money into your dream home.

Therefore, it is very important to book a paid home inspection service. A professional home inspector will help you buy a problem-free home and ensure you a worry-free living.

There is a lot at stake in buying a home you have always dreamed of and much care goes into buying that dream home. Therefore, work with a good financial planner to make sure you are buying a perfect home that can fit your budget without compromising your financial future.

If the purchase process is done right your home can be your haven; whoever, if it is done wrong then it can turn out to be a money pit.

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