Ready to own your own home? Ready to make the investment of your lifetime? Here are three things to know financially when buying your first home.
Preparing to buy your first home is both exciting and stressful. Before you start down the road of home ownership, it is vital that you have all of your finances in order and that you fully understand what is in store for your budget. Here are three things to know financially when buying your first home.
Mortgage and Down Payments
The world of mortgages and down payments can be confusing for the first-time homebuyer. Understanding the differences between a fixed-rate and an adjustable mortgage will help you to make a more informed decision. You also need to plan how much money you want to put down on the home. There are several advantages of placing a 5 percent down payment, but it’s important to consider what works best for you and your financial situation. Keep in mind that if you put less than 20 percent down, it is likely you will be charged a monthly fee for private mortgage insurance (PMI). Consider the pros and cons as you're weighing the offsetting advantages of placing a 5 percent down payment.
Set a Price Range
Picking the right price range is an imperative step in finding the right house for your personal needs and your budget. When it comes to real estate, timing is everything. If you are shopping in a buyer's market, you are going to get more for your dollar. There are a host of online tools to help you figure out how much home you can afford. A lot of times, a real estate agent can also help you to figure out how much you can afford. You also need to examine your current and projected lifestyle to determine how much you can spend. For example, if you plan on having children in the future, you need to add these costs to your overall budget, especially if one parent plans on staying home with the kids.
Budget for Extra Expenses
The costs of purchasing a house go well beyond the basic outlay for the down payment and insurance. Chances are that if this is your first home, you will be upgrading to a significant amount of additional space. This will likely necessitate that you set aside extra money for new furnishings. If you are moving into a newly constructed home, it is also probable that you will need a budget for landscaping. Depending on the condition of the home, you will want to have some cash on hand for repairs and renovations.
Equipping yourself with the right tools and knowledge will help the process of buying your first home go more smoothly. All of the stress will be worth it once you are relaxing in a place you own.
Related: Real Estate in the Digital Age: Why you still want an agent by your side
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