You start dreaming of how wonderful it would be to own a home and start looking around the internet at homes.
It’s an admirable goal with lots of great benefits; building equity, improving your credit score, potential income down the road, but first and foremost it’s a place that you can call your own and build precious memories with your family.
“The distance between your dream home and owning a home is called action”
Dreaming about owning a home is the first and most important step, but buying your first home can be one of the most exhilarating and stressful moments of your life.
Armed with the right information, you can shop for a house, apply for a mortgage, and close the deal with confidence.
Where to Start
The most important thing to do before buying a home is to make sure that it’s the right time to buy. Generally owning a home for at least 5 year, pays of financially (Capital Gains tax benefit, this is for another post). You should play around with a Rent vs. Buy Calculator
Step 1: How Much House Can You Afford? villa
I know it’s a touchy subject, but it’s an important one. If you stretch your budget to buy your primary residence that you can barely make payments on, it becomes a liability.
You should want to buy a home, because you want a home, not as an investment. Only buy a house that you can afford today!
As a rule of thumb try to keep your housing expenses (Mortgage, Interest, Property Taxes and Home owners insurance) at about 30% of your income, if you spend much more than that you risk the chance of finding it difficult to cover your monthly expenses.
Step 2: Get your Financial House in Order.
Imagine, you have been searching for the house of your dreams, you finally found it, you go ahead and make an offer, the next day you go down to your bank to apply for a mortgage only to find out that you are not financially qualified to buy it. Your credit score is too low. This could have been avoided with a little advance preparation.
Check Your Credit Score- It should not come as a surprise but getting a mortgage requires a good credit score. This would be a good time to look at your credit score.
You can do so at credit karma or annual credit report both are free to sign up. Be sure to check for errors, this could include accounts that don’t belong to you, wrong addresses, and incorrect payment status.