There aren’t many things in life more exciting than searching for and buying your first home. It’s an experience you’re sure to remember for many years to come (even if you eventually move on).
However, with so many mistakes lurking, it’s critical that you prepare accordingly. You don’t want a misstep to result in a sour experience.
Here are several financial tips to follow when buying your first home:
- Know what you can afford: This is job number one, as it will guide every other decision you make. The best thing you can do is review your budget, secure a preapproval and then decide how much you’re comfortable spending on your mortgage payment each month.
- Consider all the costs: The home itself is your biggest cost, but there are others associated with both buying and owning. This includes but it not limited to taxes, private mortgage insurance, interest on your loan and HOA fees.
- Save a down payment: The more money you put down, the smaller your monthly mortgage payment will be. Furthermore, it puts you in a position of equity from the start. As a general rule of thumb, shoot for 20%. With this, you avoid private mortgage insurance, which will save you money every month.
- Prepare for closing: Even if you have everything in order and feel good about the ability to close on time, you never know what will pop up at the last second. You must prepare for anything that could come your way during the closing process. For example, make sure your financing is in order, that you have title insurance and that an attorney has reviewed all the documents associated with the purchase. The work you put in now could save you a lot of time and money in the future.
With so much excitement surrounding the purchase process, it’s easy to lose track of what you’re doing when buying your first home.
As long as you slow down, carefully consider every move you make and keep your financial health in mind, you should end up in a good place when it comes time to close the deal.