Buying a home for the first time can be one of the most amazing processes in anyone's life. Finally moving in can serve as the foundation for memories to come. Although many people will buy and sell their homes throughout their lives, they will remember this particular purchase for the rest of their lives. Because this moment is so important, it is prudent to follow certain tips to ensure your safety, happiness, and financial future.
Debt-to-income ratio
Debt-to-income ratio defines how much debt you have compared to how much income you have. Although you can obtain a loan with a ratio of 36 percent or so, you should ideally get the ratio down to 15 percent to 20 percent. The reason you want a low ratio is because being able to get approval to buy a house is not the same thing as being able to afford a house. Affording a house means being able to purchase a home in such a fashion that you minimize and not maximize your mortgage-related bills.
Additionally, if you want your home to remain nice, you have to understand that buying a home will require ongoing maintenance and upkeep. You will not be able to afford this with a 30+ percent debt-to-income ratio because all your money will be going elsewhere. Freeing up debt ensures you can buy a house and also afford to maintain it.
Fixed versus adjustable loans
If you buy a house with a fixed interest rate, you can plan accordingly. If you buy a house with an adjustable loan, you will enjoy a low mortgage for the duration stipulated in your contract. Following this duration, your mortgage will increase. An increased bill that you will likely have for decades is not the type of financial burden successful home owners carry.
Inspection items
Anyone within the Sunshine Coast area Ensure should have an inspector check the electricity, roof, and plumbing for any home under consideration. Many times, people forego having a plumbing inspection as it is not required in many jurisdictions to secure a loan. Securing a loan, however, is not the purpose of a home inspection. A home inspection is designed to let the buyer know what is right and wrong with the property. The plumbing is a major component of the home. Get it inspected.
Additionally, when you are getting the plumbing inspected, ensure you get the internal pipes as well as everything outside the home scoped. Doing both ensures you will not have expensive surprises once you move in.
Pay closing costs
Do not add closing costs to your mortgage. A common formula is for every $1,000 you finance adds $15 to $20 to your mortgage. If you have closing costs of $5,000, you potentially add $75 to $100 to your monthly mortgage. This is money you could use to pay the annual property taxes or to make repairs.
Pay full asking price
Depending on the property, if you pay full asking price, you set the stage for it to increase in value later on. For instance, comparables impact the homes within a few blocks of any particular home. If you pay more for your home, other homes similar to yours can expect to sell for something similar to what you paid. When they sell their homes, their closing prices becomes comparables for you. Conversely, if you negotiate a lower price, other people will not be able to negotiate higher prices if they sell their homes. If they can only get low prices, when you go to sell your home, the comparables will not be very high.
Of course, this is a matter of some debate and paying full price depends on the house, the price, and a variety of other factors. That said, you should consider if a discount on your purchase price will impact your ability to profit later on.
Down payment
Ensure you can pay a 20-percent down payment as it will save you unnecessary private-mortgage insurance (PMI), which can run $100 or more per month. This type of extra cost is an unnecessary financial burden that can impact your ability to remain financially viable if your finances take a nosedive.
Loan-approval letter
When you find a house that you are ready to make an offer on, ensure you have a loan-approval letter issued from your bank. Such a letter indicates to buyers you have the means to buy the home. As such, sellers will seriously consider your offer. Without this letter, they will likely not consider your offer on their home and instead sell it to someone else with proven means to purchase.