Buying a home is one of the most cherished dreams for any person. It’s a decision that requires a lot of planning and a big financial commitment on the part of the individual. It’s important that the decision is based on sound understanding of your finances, so that you can acquire your dream home without hurting your future financial goals.
As they say, location, location, location. A small home such as the one below could sell for more than the large one above if it is an extremely desirable area.
Here are a few tips for home buyers to help them prepare for this important but often overwhelming process.
Ensure that you meet the prerequisites
Take stock of your financial situation to ensure:
- You have little or no outstanding debt. If not, try and pay them first before embarking on buying a house.
- Your savings are in good health to take care of your expenses for at least 6 months after making the down payment of for a new house. If not, start saving extra to build up sufficient funds.
- Income wise, you are secure in the foreseeable future. If one of the following is true, then try and secure this front first:
- You don’t have a regular job
- Your business is not doing well
- You are not happy with your current job, and the market does not have many opportunities
- Explore the real-estate market. Make sure approximate price of the kind of house you want falls within your affordability range.
Plan a budget
Figure out the budget for the house you want to buy. Assess how much you can afford to pay upfront and what would be the ideal monthly instalment for you to pay. The upfront amount to be paid is usually 20% of the total cost of a property. After having made the down payment out of your savings, no more than 25% of your monthly take-home salary should be planned towards paying the loan instalment.
Similarly, plan ahead for the closing costs too, which can be of the tune of 5% of the loan amount. They might need to be paid in future, but it’s better to keep that money reserved or start saving for it.
Find the right home to buy
Do proper research and identify a house that fits your budget and is located in the right neighborhood. Take help of a professional agent if you’re not well-versed with the real-estate scene in the area. Don’t fall for a lucrative offer that makes an unaffordable property look otherwise. Most importantly, stick to your budget.
Get pre-approved for a loan and select the right lender
If you’ve taken care of the prerequisite and planning stages, it should not be difficult to get a pre-approval letter for a loan. Any lender will be willing to lend only after assessing your income and debts. Getting pre-approved gives you an edge in the whole process.
Select the lender carefully based on reputation, competitiveness of the rate, transparency of lending offer and your own experience of dealing with them.
Negotiate hard and get the best deal
You are investing a great amount of money into buying your dream home. So, don’t shy away from negotiating hard and obtaining the best deal possible for you. Do your homework and revise it frequently during the deal finalization process without getting intimidated at any stage. And, don’t let them know if you have fallen in love with a property. That will make it much harder to negotiate and get a good deal.
