Considering buying your first home? Prepare yourself for one of life’s most demanding experiences with our first time home buyer’s mortgage checklist. Buying a home for the first time is stressful. Prepare yourself for one of life’s most demanding experiences. Bereavement is the number one cause of stress, but moving home and increased financial obligations aren’t far behind.
However, you can ease the pressure by asking all the right questions via a robust first time home buyer checklist. Here’s everything you need to ask yourself before looking for your dream home.
Do you have enough saved up for a down payment?
Unless you have been planning for this for many years, the answer is probably no. This means that you need to start saving up your money with a goal of making an offer in a year or two.
It also helps to make sure that you have a good idea of the market and the amount of money you need to save. Make sure you have 10 percent saved for a down payment—20 percent if you want to avoid private mortgage insurance (PMI), which can run several hundred a month. If you haven’t already, take advantage of the great interest rates offered by online savings accounts.
Do you have a substantial budget in place?
If you don’t have enough money saved up right now, you need to create a plan to generate that cash. The sooner you start managing your money and saving, the better the chance of reaching your goal. Be disciplined and strict with your incoming and outgoing finances and make sure you are on top of everything.
Yes, homeownership makes more financial sense than renting. However, it’s better to rent than to own more house than you can afford. We at Money Under 30 advocate for a percentage-based budget scheme, such as the 50-20-30 system. This may sound complicated at first, but our in-depth guide walks through it step-by-step so you can create a simple-to-use budget in no time.
Is your credit ready?
This might be the scariest part of this first time home buyer’s checklist. Once you have signed the right documents and finally moved into your new home, the mortgage stays with you. There is a good chance that the parents nagging you to buy a house still have a mortgage hanging over them. This is where all that effort of saving and planning starts to pay off. Your mortgage advisor will take lots of factors into account before they can determine a suitable rate. These factors include the following:
The amount of savings available for a down payment. Any potential threats to your income, or that of your partner. Your current credit score. Speaking of credit, for every point your credit score is below 800 you’re going to pay more in interest. And while the difference between 3.9 percent and 4.9 percent may not seem like much, that one point will cost you about $32,000 on a $150,000 30-year fixed-rate mortgage.