So you wish to become a homeowner. Good for you. Real estate is, for most people, the biggest financial investment they will ever make. But there are a number of important issues to consider so that your purchase is good for both your lifestyle and your pocket.
And it’s something you can do successfully if you take some well-known and proven steps. Here are a few vital pointers.
Know your limit
Buying your house should be a wonderful experience. One perfect way to make it so is to not pay too much or borrow too much. Get that right and you are well on your way to being a successful homeowner.
Your method of paying is made up of two things – your deposit and your loan. If you have a large deposit then you will have a smaller loan. And the smaller your loan, the quicker you can pay off your mortgage.
Work out what you can repay every month. Take into account who is paying. If there are two people contributing to the repayments, think about the possibility one of you losing your job or stopping work to have a family.
Your lender will have rules about the upper limit of your borrowing depending on your savings and income. Find out your top price and don’t bid for anything higher. It doesn’t matter how much you fall in love with a property, if its price is too high, it’s not for you. Of course if you can talk the vendor down then that’s great but remember to know your limit.
This is often called the down payment and it’s your share of the purchase price. The rest comes from your lender, usually a bank. Can you buy a house with a zero down payment? Yes. Is it a wise thing to do? In many cases definitely not and you’ll see why if you look at the sub-prime housing crisis in recent times. Try and make your deposit as high as possible but do not borrow it. Not from another lender and especially not from relatives or friends.
Remember that your chances of getting a loan, a mortgage for your dream home, are better if you have a decent deposit and on top of that, you’ll get a better deal with your loan. The bank will see you as a good risk.
These just bob up when you may think your financial business is all done and dusted. Some of these extras include
• Fee to the bank for raising the mortgage
• Costs to a surveyor
• Legal fees to your lawyer
• Registering the title deeds
You need to plan for these costs before you arrange your mortgage. Find out what these costs amount to and either have a cash reserve to pay them or factor them into your mortgage. Mind you the lender may increase your interest rate by say.25% if they cover your extras so there is always a possible down side. The point being that you must be aware of these charges and allow for them in your overall budget.
Of course there are many other issues involved in buying a house but if you follow the tips above, you are well on the way to buying your dream home and buying well.