Finance

Ready to Buy Your First House? Make Sure You are Financially Prepared with These Tips!

Buying your first home is both exciting and challenging. Because purchasing a home is such a significant financial commitment, it’s important to be prepared and to know what you are getting yourself into. If you are ready to buy your first house, you should make sure you are financially prepared. Here are a few tips on how to do that.

Check your credit score

One of the most critical factors in whether you qualify for a mortgage and what interest rate you get is the status of your credit score. If you have a good credit score, then you will be eligible for the best interest rate. If your credit score isn’t so high, you might wind up with a higher rate, which can cost you tens of thousands of dollars over the life of the loan. Here’s the good news—a credit score can be built up over time with the right strategies.

Get preapproved for a mortgage

Getting a mortgage pre-approval does not guarantee you a home loan, but it does go a long way to helping ensure that will happen, and it also can give you a good idea of what you can afford. A mortgage pre-approval also can help you in the buying process, because sellers will be more likely to accept your offer if they feel confident you can actually complete the closing process.

Determine how much house you can afford

While a mortgage pre-approval can give you an idea of how much house you can afford to finance, you also have to determine if what the bank thinks you can afford is what you feel comfortable paying. Keep in mind that the bank’s estimate for a monthly payment may only include principal and interest, and you still have to account for property taxes and home insurance. You also have to think about ongoing and one-time maintenance costs, which can cost as much as 1 to 2% of the price of your home annually.

Make sure you have a down payment

It’s important to be able to make a down payment on your home. Not only does this show the bank that you are willing to put some skin in the game, it also can lower your monthly payments. The more money you put down up front, the less you will have to pay in mortgage insurance payments.

Following these tips will help to ensure you are financially prepared to buy a home. Buying a home is expensive, and you want to do all you can to make sure you get a good deal.

References:

5 Things You Need to Be Pre-Approved For a Mortgage

How Much House Can I Afford?

How Can Millennials Build Credit?

How to Save for a House Down Payment