- Buying a home requires you to be ready financially.
- It can be a stressful process to find and buy the right property.
- Being realistic about your budget is one of several ways to simplify the process.
Don't buy your first house without reading this.
Buying your first home is a huge life milestone. It could set you on the path to building wealth since a home is a valuable asset. And it could help you develop permanent community ties and set down roots.
But buying a home can also be stressful -- especially because you're making a major financial commitment and you'll need a lot of money to purchase a property even if you get a mortgage. The good news is, there are ways to make the process easier including following these four tips.
1. Look into first-time home buyer programs
Many lenders offer special first-time buyer programs. These often make mortgages easier to qualify for by relaxing some of the requirements to get approved or by allowing a lower down payment.
States also offer programs aimed at helping first-time buyers. You can find out the specifics of them by visiting the Department of Housing and Urban Development (HUD) and searching for your state. For example, the Pennsylvania page has a list of first-time buyer programs organized by city and town. Many of these programs offer buyer education, resources for affordable mortgages, and more.
2. Set a realistic budget
Buying your first home can be a challenge because you need to save up money for a down payment, and you will become responsible for mortgage payments for the first time.
You don't want to devote too much of your income to housing, nor do you want to try to buy with a very small down payment, so you should be realistic about how much you can afford. Ideally, you should have a 20% down payment and should keep your housing costs below 25% of your income.
Remember, your first home doesn't have to be your final home. If you can't afford your dream property, you can buy a starter home and start earning equity and benefiting from rising property values. Once you have more money, you can buy a larger property later if you want.
3. Make sure you have plenty of savings
Homeownership comes with a lot of added expenses beyond the mortgage since you'll be responsible for property taxes, maintenance, and repairs. You likely haven't been paying for these things as a renter.
You'll need to be sure you have savings not just to cover unexpected costs but also so you can keep making your mortgage payments if you lose your income temporarily. You don't want to risk foreclosure so this is crucial.
Ideally, you will have enough saved to cover three to six months of living expenses, including your new mortgage payment, before you go ahead with buying. This will reduce stress and make it more likely a bank will approve a loan since the lender will feel better about the assets you have in reserve.
4. Shop around for the right mortgage lender
Finally, you'll want to get quotes from multiple mortgage lenders and shop around to compare what each one offers. By checking out all your options, you should be able to find the most affordable loan so you keep your housing costs down.
Each of these four steps can help ensure your first home purchase is a successful one that enables you to set down roots and benefit from the financial advantages of being a property owner.
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