There comes a time in most adults’ lives when they get tired of renting and decide that it’s time to become a full-fledged owner of a home. Rental costs are often higher than mortgage repayments, so by that logic, everyone should take out that loan and work towards a firm place on the property ladder. However, things aren’t that easy, and there are a few things that you should get in order before becoming a first-time homebuyer.
Saving Your Money
It’s not enough to have a steady income if you’re looking to apply for a mortgage, as there are various other costs in place that lenders use to vet applicants.
The largest of said costs is the down payment that you’ll have to make on the loan to seal the deal. Some down payments are reported to measure up to even 20% of the mortgage loan’s overall value, which is sometimes the case but not always. With a 20% down payment it’s highly unlikely that you’ll have to take out a mortgage insurance policy (for the sake of the lender in case you default), while also reducing your monthly payments significantly.
You can make a lower down payment with mortgage insurance, but there are government-backed schemes that allow for small down payments without insurance, such as FHA loans (3.5% down payment) and VA loans for veterans and active servicemen (no down payment). Either way, you’ll end up paying around 3-6% in closing costs once the deal is done.
Certain lenders may want your bank balance to look healthy enough to pay off a few months of repayments for added security, along with the awareness that you’re not under significant amounts of existing debt that may interrupt payments. Along with all of this, you should have money saved anyway because maintaining a house isn’t free and it certainly isn’t cheap.
Know What You’re Looking For
A mortgage is like a marriage, they’re both commitments that will hopefully leave you with something good for the rest of your life - don’t rush in. Preparing to buy a home is about a lot more than just getting your finances in order, you need to consider exactly what it is that you need from a home.
Is it going to your own personal apartment or is it going to be a family home? Are there schools nearby or is it closer to the city? These are all vital elements of what makes a house a home, so be meticulous in your search before throwing your money at the first mortgage plan that you can afford. You deserve a home that really works for you, so try not to settle for less.
As always, happy househunting!