Buying a home is one of the biggest decisions you will make in your life, financially speaking. It’s a big investment and a lot goes into being able to afford a home. If you are just starting off, there are some things you should know that can help put you in a better position to buy your first home. Things like timing, savings, and fees are all important to keep in mind when starting the process of buying a home.
The first aspect of timing relates to your personal finances. Before considering buying a home, you should make sure you are out of any bad debt like credit card debt. This will help ensure your credit score is high, which will result in getting a better mortgage rate. If you are struggling with debt, start a game plan to tackle it so that you will be in a good position to buy a home in the upcoming years. Focus on your smallest debt first, then work your way up to larger debt. Make sure to not make any large purchases like a car right before buying your home.
Buyers’ vs. Sellers’ Market
The second aspect of timing is watching the housing market. If this is your first home, you will want to wait until there is a buyers’ market. Essentially, in a buyers market, there is more supply than demand. For you as a homebuyer, this means lower prices on homes and less competition for the home you want.
Even if you’re not ready to buy a house right away, it’s recommended to start browsing in the area in which you are planning to buy a home. This will give you a better handle on the market. You’ll start to understand average home price, average time on the market, and the range of homes in the area.
Understand Your Monthly Expenses
Take the time to understand exactly how much you need to budget to pay for your home monthly. This should include your mortgage, utilities, insurance, HOA, and annual taxes. To be safe, it’s generally recommended to budget around 30% of your monthly income toward your housing expenses. This may be more or less depending on the area you move to and your personal income.
It’s important to remember that just because you were approved for a certain amount for your mortgage, you don’t have to go that high. You can easily choose a less expensive home with a smaller mortgage and put your money toward other things like renovations.
There will be additional fees associated with buying a home aside from the actual cost of your home. You should be prepared to spend a few hundred dollars on appraisers and inspectors. Keep in mind that you will also have to handle closing costs. Other fees that you may be responsible for include HOA fees, property taxes, utility hookup fees, moving costs, renovations, furniture, etc.
This is just a small glance at some of the things you need to keep in mind when saving up to buy your first home! For more tips on moving, make sure to sign up for our newsletter.