5 Must things to Consider When Buying a Home
5 Must things to Consider When Buying a Home
Buying a home is a huge step to take towards the future. This is a life changing process. This requires a good amount of financial support and planning. When buying a home a lot of factors should be kept in mind. Here are the 5 must things you should keep in mind while planning on buying a home.
1. Consider your financial situation when buying a Home
Before buying a house you should always consider your financial status. You should make sure that such a huge expense can be a part of your monthly budget. If you are privileged enough to pay for your property at once, this monthly budget consideration should not be your problem. But most of the people but properties with loans. So they need to keep their monthly financial status in mind before purchasing the property.
It takes about 15 to 30 years to fully pay back the loans for buying the house. In addition to the loans, there are other expenses such as insurance and property taxes and maintenance cost. All the additional costs should also be a part of your monthly budget. So it is very important for the buyer to keep his income status in mind before buying a home.
2. Types of mortgages
When you consider buying a house with a loan. You have two types of loan plans. Fixed rate mortgage and adjustable rate mortgage are the most commonly used loan plans.
Fixed rate mortgage: In this type of loan the interest rate stays the same over the lifetime of your loan. And the payments are equally divided among the months. The longer your loan term is the lesser you will need to pay each month.
But the interest rates will be sky high in this type of loan because the company will be giving you a long period of time to pay back the money. So the companies make good business by giving out loans which require a long time to payback.
Adjustable-rate mortgage: Adjustable rate mortgage has a fixed interest rate initially for a certain amount of time. But after a certain period, the lender has the opportunity to adjust the interest rates.
For example, there is a 5/1 ARM for the first five years. So after the first five years, the lender has the right to change the interest rate annually depending on how much the lender can pay each month.
If you consider ARM as an option you should always be sure about how much raise will be there in your income. Because these decisions cannot be made by assumptions.
So when you are looking for mortgages you should choose the plan which will fit you the best financially. Nothing is worse than having a headache about finances. And buying a house should give you happiness, not stress. So choose your loans wisely.
3. Your credit score
Credit scores should be analyzed before you buy a house. Your credit score will help creditors judge your creditworthiness. 740 or higher credit scores expected from the borrowers in order to get the best mortgage deals. But do not worry if you do not have a good credit score. Houses still can be bought if you have a credit score.
But the problem you will face is that your interest rates will be higher if your credit scores are low. This high interest will cost you a lot financially. Roughly this interest will take away hundreds of dollars from your account monthly. If you have very low credit scores you might not be eligible for mortgages.
Read also: Things to Consider When Investing in Real Estate Overseas
So always try improving your credit scores before planning on buying a home. There are banks or websites which help you check your credit scores. Credit scores might not seem very important but this score can save a lot of financial pressure.
4. The price of the home
The expensive the house you are planning to buy, the more you will pay monthly. So when you are on the search for buying houses you should consider your budget. You should have a clear idea about how much you can afford to spend monthly. You should not compromise your needs when buying your house.
As buying a home is a long time investment so initially, all the factors should be taken into account. You should consider factors like, whether you will have a new family member, or your children will move abroad and many other factors.
If you know your kids will move out soon you should consider buying a small house or if you know you will have a new family member in the future so you should buy a house with extra rooms.
All these factors should be considered while buying the ideal house. After you see your requirements you can start searching the houses according to the price range. The price of your house varies according to the facilities and surroundings.
You should look at houses according to the area you want to live in. Look at the price range and choose according to your budget. Compare the prices with the other houses in other areas and then take the best decision. You should put your needs and finance together on the same plate
And make a choice with feeds both.
5. The down payment
If the place you want to buy has a large down payment this means it reduces the monthly cost of the mortgage. But a higher down payment can be very costly. If the down payment is about 20 percent then this gives you access to avail lower interest rates. This helps you in reducing costs such as paying private mortgage insurance.
Down payment lowers your monthly installment rates but it also reduces the interest level. So it might not seem like a financially good deal initially but giving a down payment helps in the long run. But when you consider giving a down payment you should always consider the price of the house because the price of the house plays a huge role in the monthly transactions for your property.
For example, if you want to buy a very expensive house and you want to pay the down payment, you will need to consider that the down payment will be higher even if it requires five percent down payment.
So the higher the price the higher your down payment rate will be. So, everything comes down to finances when you consider buying a house. Down payment will make buying the house affordable but the initial costs will be very high.
In conclusion, you will need to choose the type of house which will not be a stress to you in any way. We all have wanted but when buying a house for the first time few wants might need to be compromised in order to achieve ownership. So when buying a house look at your financial status and make the right decision.