Want to buy a new house doesn’t mean you’re actually in the market to buy a house. You need to be financially capable for the latter. And no matter how much you need a new location, most real estate agents are more likely to approve your purchase if they know you can be financially committed to such a long-term deal.
So before you make the hasty decision of buying a property, let’s take a look at some sound advice regarding your purchase.
Secure Your Down Payment First
The most obvious sign that you’re not ready to purchase a home is if you’re not prepared for the down payment. It can range from either low 3% to 20 or 25% of the total price of the property and factor in your credit score, it can go either up or down. This is probably the longest part of the whole preparation since it can take quite a while before you have enough money for it. And it doesn’t mean that once you have enough money for the down payment, you’re fully ready to buy. Some more expenses and fees will eventually show up and it’s critical to prepare for them too.
Don’t Forget About Closing Costs
Here’s something that’s not discussed very often: you also need to prepare for the closing costs. They’re essentially other miscellaneous fees you have to pay including any appraisal fees, or title insurance, or taxes, or even fees you have to pay the real estate agent. Even real estate transactions like gifts of equity, or selling property to a friend or family for a very low price, will still have closing costs. It’s best to leave some room, around 5-10% of your down payment fee for closing cost.
Save Money for the Big Move
Moving locations can be expensive, you have to bring all of your appliances and furniture, items and clothing, and everything else to your new location. And it won’t just take two trips in your car. You will have to hire a moving truck and their professional services to help make the entire process even more convenient.
But it’s not just the act of moving that can be expensive. If you’re going to send your children to a new school, you might have to spend extra to process everything. You’ll have to buy newer furniture to make the new property more homely and cozy, among other moving-related expenses. Factor this into your budget- forgetting to do those might inevitably cause you to borrow.
Factor In Your Mortgage
You might have been able to give a down payment, but how comfortable will it be for you to make the monthly mortgage? Many real estate companies and housing financing programs require you to report “disposable” cash or a significant savings account as a means to prove that you will be able to pay your monthly mortgage. If you’re going to find it difficult to keep a monthly fee (mortgage isn’t cheap!), then you might have to reconsider whether it’s the best time to buy a home.
Allot Money for Any Repairs
It fully depends on what type of property you’re buying, but if you’re buying a resale home, you might want to check for repairs. Of course, before it even went on the market, it would have been checked for maintenance requirements, but it helps to be vigilant. Especially in the case of buying a fixer-upper, knowing what to fix is critical. It’s important to figure out whether you need to call an experienced plumber or electrician, since you don’t want to be disappointed a few days after your move only to find out you’re lacking some basic necessities, or worse, find out that they need repair in the middle of using them. Of course, this also factors in your funds, as repairs and maintenance can be rather costly.
Never Neglect an Emergency Fund
And of course, don’t ever make the mistake of not having an emergency fund. This is something that you should have prepared well in advance, but if you still haven’t, it’s best to start now. The home buying process will most likely take a significant chunk out of your finances, and you might have to use reserves. An emergency fund will allow you to live comfortably and safely while recovering from the significant financial commitment you just took.
We understand that buying a home is a major milestone in anyone’s life. But It’s also something that’s best approached carefully, as doing it wrong can eventually affect your life down the line.
