So you’ve seen a house and land for sale that you’re interested in and are determined to purchase it. It’s a huge move, and you’re very excited. There’s just one problem, though. This is your very first huge investment, and you are not sure how to go about the process.
You know you can’t afford to make a mistake on a six-figure purchase. So how do you go about it? Here are five smart financial tips to guide you.
1. Pay your debt.
If you’re like most people, chances are you have a pre-existing debt. It’s best to pay it down first before you start house hunting. Even better, eliminate the debt completely. That’s because owning property makes it significantly harder to clear your debts.
Moreover, having debt will certainly impact the mortgage terms. Being debt-free or having less debt usually helps you get much better mortgage terms or rates in Guilford.
2. Establish your financial position.
Before making the leap to property ownership, you need to know your entire financial picture clearly. What’s your total income? How much money do you have in your savings account? How big is your debt? How much do you spend on your financial responsibilities?
These questions are vital in helping you know how much property you can afford or if it’s a good idea to wait until you’re in a better financial position to buy a property.
3. Come up with a budget.
Before you go to your prospective lender to ask for a mortgage pre-approval, it’s prudent to have an idea of the amount you can comfortably afford to spend on a property. Don’t leave it to the lender to tell you how much you can afford, because most of them lie.
Many lenders want to have as much money going towards house payment as possible. The last thing you want is to have all your money going towards your mortgage. That’s what being house poor is all about.
4. Pay down payment.
Generally, you want to have as much saved up for your down payment as possible. Why? Because having a sizeable down payment makes you more attractive to lenders and helps you avoid paying private mortgage insurance.
Most lenders prefer that you put down at least 20% of the total purchase price down as down payment. With this percentage saved up in your bank account, getting property in a hot market becomes a lot easier.
5. Consider the extra costs.
As you’re going to find out, buying a property requires much more than just getting a mortgage. There are several other expenses that you’ll incur both during the transaction and once the property becomes yours.
For instance, you’ll need to get the house inspected before you can purchase it, and that typically costs several hundred dollars. Other costs include taxes, attorney fees, and title fees.
Purchasing your first property can seem like a complicated affair, but it really doesn’t need to be. With proper financial knowledge, you can make the right decisions and avoid regretting down the road.