Buying a home is the most significant purchase you’ll ever make in your life. Therefore, there’s reason to be wary of how exactly to go about it.
Using these tips, you’ll be able to navigate the common pitfalls that cause many home buyers to struggle with their financial decision down the road.
Manage Your Credit and Decide What’s Affordable
The reality is that many Americans set themselves up for never ending debt struggles by spending beyond their financial means. In fact, it’s said that eight in ten Americans live paycheck to paycheck with no savings cushion at all. By overspending on your new home, you can quickly find yourself burning through your funds and struggling to make ends meet.
A great rule of thumb for calculating what you can reasonably afford is the 28/36 rule. This means that you should never spend more than 28% of your monthly income on housing expenses and more than 36% on your total debts. Of course, what you’ll be expected to spend and what interest you’ll accrue depends largely on your credit score and financing options.
Therefore, you should also prepare yourself ahead of time by carefully reviewing your credit score to identify issues that may be holding you back. Take this time to pay off any outstanding debts or consult a credit repair specialist who can help you get your score back to an ideal number. This will help you when it comes to negotiating the ideal loan option when purchasing your home.
Save As Much As You Can for a Down Payment
You won’t be able to purchase a new property without putting forward a down payment as some form of collateral. In an effort to make it easier for people to buy homes, many banks and program providers are making down payments cheaper than ever. However, this may end up being the worst mistake you could make.
Putting forward less money now is going to translate into way more spending down the line due to your interest rates. Inversely, you’ll pay less than you would if you pay as much as you can afford up front. A bigger down payment will result in lower monthly payments, which gives you more room to save and prepare for any potential issues that you may face in other areas of your life.
Negotiate the Loan That’s Right for You
The other major factors that will influence how much you spend are the interest rate and the life of your home loan. As with the down payment, if you can pay more sooner, you can expect to spend less during the life of the loan.
If you can afford it, elect to go with a fifteen to twenty year loan, which will earn you a much lower interest rate. However, there’s no shame in going with a 30 year fixed-rate loan. You’ll pay more over its lifespan, but the lower payments per month may make it easier to manage your personal lifestyle.
Buying Your First Home – Morris Realty Co.
The last, and one of the most important steps in buying your first home, is to have a realtor that has your best interests in mind.
Morris Realty Co. is a real estate team that’s proud to assist first-time homebuyers throughout the state of Georgia. A cornerstone of our business is building lasting relationships with our customers. That relationship begins and ends with a service you can trust.
To start your home buying journey, be sure to take a look at our active listings! For additional questions or concerns about the real estate process, give us a call today at 678-210-5028.