Buying a home is a big decision that takes time and money. It may seem far away, but you might need to start saving for a house now.
In fact, planning ahead might be crucial in ensuring that you don’t end up renting forever.
There are so many important things that you must consider before you can make the right decision and buy the house that’s just right for you.
No worries. I’m here to help!
Plus I founded a therapist recommended online course called The Anxiety Cure.
I love helping people to live their happiest lives and manage stressful situations – like buying a home.
So that’s why I put together this article all about if you need to start saving for a house – right now!
To get you started, we’ll discuss 6 things you must consider when planning for home ownership.
Before we move onto other considerations, you must figure out this question first: Do you really want to own a house or just renting one would suffice?
Buying and renting both have their own advantages and disadvantages, and it’s important to be aware of them.
For example, buying a house will save you from escalating rent payments and let you build equity. You can even earn an income if you decide to rent your property out. But at the same time, it can drain your bank through high maintenance costs.
Similarly, renting will give you flexibility (you can easily move to another place) at the expense of stability (your landlord can ask you to move out).
If you’ve made up your decision to buy a house (vs renting one), continue reading to find what you must consider next.
You can’t start browsing for your future house before settling on a price tag that’s affordable.
To set up your budget, first figure out how much you can spend on your monthly mortgage payment. Financiers usually recommend only buying a house that comes with a monthly payment of less than 25% of your take-home income. This might be tricky if you aren’t currently working, but an estimate is better than nothing.
There are plenty of online tools that will let you calculate and explore monthly mortgage payments for different prices and plans – for example, this Homestar Finance home loan repayment calculator.
Also, don’t forget to account for hidden costs involved in a house purchase. These include home insurance, private mortgage insurance (PMI), your agent’s fees, house maintenance fees, and taxes.
Make sure you stay well under your maximum budget limit even after accounting for all the expected costs. This way you’ll always have some spare cash to accommodate emergencies or to save up for a holiday (once you start working full time you’ll want them).
The last step of getting your finances ready is getting cash lined up for a downpayment.
Although 10% of your new house’s value is good enough for a downpayment, paying 20% is even better because it eliminates the need to pay private mortgage insurance (PMI).
A higher down payment can also help you secure your mortgage at lower interest rates because the more money you put down, the less risk you pose to lenders.
So when you’re saving cash for your down payment, remember to start saving early, because: the more the merrier.
The interest rate you’re going to get largely depends on your credit score. So, if you haven’t checked your credit score before, it might be wise to do so.
Credit scores usually range from 300 to 850, with 850 being the best. They tell your future lenders about how good of a borrower you are.
If you’re habitually late in paying your dues, have borrowed more than ⅓ of your allowed credit limit, or have too many hard inquiries into your account, you probably have a bad credit score.
This can make securing a loan difficult, and even if you get approved for one, you’re going to get charged with higher interest rates.
Interestingly, if you are able to boost this score, you can use it to your advantage to get a cheaper loan approved quickly.
When it comes to buying a house, nothing is more important than choosing the right location.
You must ensure that you find a location that has easy access to the places you visit most frequently. For example, if you like to shop often, you’ll want a good shopping mall near your new home. Similarly, when it comes to your kids, having parks nearby is essential.
It’s also important that you find a neighborhood that suits your needs. If you’re a person who likes the peace of secluded areas, then moving to a busy area with noisy neighbors will ruin your living experience.
Finally, keep in mind that while certain locations might be less valuable now, this will almost certainly have changed by the time you end up buying your home – and it will continue to change after you own it.
Although older houses have a certain charm and appeal, they also need more improvements and repairs.
While some of these repairs might be cosmetic, other repairs — such as improving outdated plumbing and wiring — will definitely take a lot of time and energy.
If you don’t want to get all these additional maintenance expenses on your bill, look for homes with recent construction. Chances are that they won’t need any extensive repairs.
To be on the safe side, you should get a house inspection done before closing the deal. Identifying any major issues before finalizing the deal will let you back off at the right time. If not, it might make the house cheaper for you.
Join my therapist recommended online course: The Anxiety Cure.