When it comes to purchasing a new home, especially as a first-time buyer, it can be an overwhelming process and knowing exactly what you should and shouldn’t be doing or what questions you should be asking. Before you even get to the point of exchanging contracts, you should ask yourself some critical questions.
Can You Afford It?
It could be a waste of time to begin looking at houses before determining how much home you can afford to purchase. In addition to the purchase price, there are other costs to consider, such as property taxes, homeowners insurance, homeowners association dues, ongoing home maintenance, and any renovations you wish to carry out on the property. You will be responsible for all repairs, and being confident you can afford an Electrician, handyman, plumber and so on when you need them is vital to ensure your home remains in a good state of repair.
If you want your offer to be accepted by the seller, you must demonstrate that you have the financial means to purchase their home. This entails obtaining a mortgage pre-approval letter.
What Is Your Credit Score?
Mortgage rates have remained at historically low levels. However, a credit score of 740 or higher is required to lock in the most favourable interest rate.
Your credit score is the most critical factor in determining your interest rate. Raising your credit score has a more significant impact on lowering your rate than reducing your debt-to-income ratio or increasing your down payment combined.
In other words, if you have a choice between paying down credit card debt or saving up for a down payment, it’s probably a better idea to pay down the debt first, as this will improve your credit score.
What Is The Right Property For You?
Buying your first home is a significant financial commitment. Aside from taking into account all of the various expenses associated with homeownership, you must also consider what type of property is best for you and your family.
However, because there are so many condominium association rules, you may not be able to personalise your home as much as you would like. For example, condominiums require less upkeep than single-family homes do. When buying a single-family home, you have complete control over the design and layout, but you are also responsible for all maintenance and repairs, which can quickly add up.
Before you begin your home search, educate yourself on the many different types of properties available and the costs associated with each one.
How Much of A Down Payment Do You Need?
Saving enough money for a down payment is one of the most challenging aspects of the home-buying process for first-time homebuyers. Some loans require a down payment of 10 per cent, while others require even less than that. But, fortunately, prospective buyers are not required to put in a 20 per cent down payment to be approved for a loan.
Before you make an offer on the house, find out what type of loan you would be eligible for. Consider the following scenario: if you have a good credit score (at least 580), you may be approved for an FHA loan and only be required to put down 10 per cent on your home.