Buying a home is one of the most important financial decisions you’ll make in your lifetime. But it’s not always easy to know where to start, and there are plenty of misconceptions about what it takes to buy a house.
This guide will walk you through the process step-by-step, from saving for a mortgage deposit, understanding different types of mortgages, making an offer on a property, and moving in.
Preparing to Buy a House
If you’re a first-time home buyer, one of the biggest decisions you’ll have to make is whether you can really afford it, and whether you’ll need a mortgage. There are lots of costs involved in home buying, but calculating how much you need to borrow is an important part of that process. To make sure that you don’t end up paying more for your home than you bargained for, consider using a mortgage calculator when you are mentally preparing yourself for home ownership. This will help you keep a close eye on your budget, which, in turn, will keep you sane.
Knowing your budget and sticking to the amount that you have set aside is crucial. There is no point in making your monthly payments go up faster than they really should. A simple mistake could cost you hundreds or thousands of dollars.
Saving for a Mortgage Deposit
Once you’ve figured out how much you ideally need to save every month, you should create a plan for achieving that goal. There are several things you can do to save money for your first mortgage deposit. For instance, you can reduce your outgoing bills by switching your energy bills to a cheaper tariff, canceling unused subscriptions like magazines, TV, music streaming, and clubs. Also, you can save a lot by cutting down on everyday spending. Perhaps you’ve never realized that your daily latte costs you $650 per year or that you spend $200 on clothes each month. The other way you can boost your savings is to earn some extra money. Look for a side hustle that can make you extra income, like freelancing in your free time or selling stuff that you no longer need or use.
Understanding the Different Types of Mortgages
The financing side of buying a home can feel overwhelming if you don’t understand the terminology. Once you’ve done your homework and worked out a budget and down payment amount, and you’ve reviewed your credit, you will have a better idea of what type of loan works best for you. Generally, there are five types of mortgages; conventional mortgages, government-insured mortgages, adjustable-rate mortgages, fixed-rate mortgages, and jumbo mortgages. Before you move forward with any mortgage, you should carefully review your financial status. Consider your needs and circumstances, and do in-depth research to determine which type of mortgage loan is most likely to help you achieve your goals.
Making an Offer
When making an offer, start by deciding how much you’re willing to pay for the property. Once you’ve been pre-approved for a loan, decide on any contingencies, especially escape clauses that allow you to walk away from the sale with your earnest money. The next step is deciding on how much earnest money you are willing to offer. The next step is writing the offer letter, followed by negotiating the price and terms of the sale.
Once you’ve agreed to the contract and the price, it’s now time to move into your new home. Before you move in, ensure you get a home inspector to check that everything in your new home is working as it should be.