Buying a home for the first time is one of the most important financial decisions you will make in your life. Financing a home is an arduous process, which begins even before you have a mortgage. If you are considering homeownership, here are some financial tips that may ease the process:
Save and Invest for Your Down Payment
The down payment is required by mortgage lenders as a way of security. Borrowers pay the down payment with their own money, ensuring that they have a personal financial stake in the property. It’s highly recommended to pay up to 20 percent of the down payment to avoid mortgage insurance, which would make your debt considerably higher. Most prospective home buyers struggle to make the down payment. You may have to spend a year or two just saving for it. Try to live below your means at the moment and save the money for the down payment. Some may also prefer to invest bonds or potentially lucrative assets like marijuana stocks. Investing in the stock market is riskier, but the potential reward is higher. Saving your money is least risky but the interest yields will be much lower.
Assess Whether You Can Afford a Mortgage Payment
Owning a house would add more costs to your everyday living expenses, not less. Paying rent is actually less expensive than homeownership. Therefore, it’s important to ensure that your monthly budget can actually afford the mortgage payments. Prospective homeowners are usually worried about getting approved for a home loan, and they often overlook this crucial aspect. You should budget your monthly expenses for ideally a year to see which expenses are necessary. Now add a mortgage estimate to this budget and see if your family can manage the payments. You should account for every little expense for the calculation to work. If you can’t afford the monthly mortgage payments, you could end up in very serious debt.
Have an Emergency Fund First
Financial advisors discourage earners without emergency savings funds from taking on a mortgage. A good percentage of your monthly income would go towards the home loan, therefore, it’s paramount that you have money saved up for a financial emergency. When saving up for the down payment, also save for financial emergencies. Don’t take on a mortgage until you have a sizeable emergency savings account. A mortgage and a financial emergency could end in disaster if you don’t have quick access to finds.
Don’t Forget the First-Time Homebuyer Benefits
You may qualify for either government or private benefits if you are buying a home for the very first time. These benefits could sizably contribute towards your mortgage. Some may even offer a reduced interest rate, therefore, do your research into first-time homebuyer benefits that you can apply to before meeting with mortgage lenders. If you do qualify for an assistance program, you can shop for mortgages armed with this information. Lastly, take your time to meet with several lenders to choose the right mortgage package for you. You may need to carefully review your financials right before you sign the documents. Until then, keep the above tips in mind.