Purchasing a new home can be an exciting time, especially for first-time homebuyers. But before you start popping the champagne, make sure you are properly prepared. Here are some tips aimed at first-time homebuyers.
Pay Off Your Debts Owning a home is expensive, usually much more than renting, with additional maintenance and upkeep costs. So don’t even think about buying a home until you have paid off all your debts. Credit card debt is the worst in terms of interest rates, but you should also try to tackle long-term debt such as student loans. Experts also suggest building an emergency fund that will cover 3-6 months of expenses. Determine How Much House You Can Afford Before you get attached to a beautiful house, check your monthly budget to determine exactly how much house you can afford. You need to leave room in your budget for added expenses, so make sure your total monthly housing costs (including property taxes and insurance) add up to no more than 25-30% of your monthly take-home pay. For example, if you bring home $5,000 a month after taxes, multiply that by 25% to establish a monthly maximum house payment of $1,250. Save for a Down Payment It’s unrealistic to expect to pay cash for your first home, but you should aim to save enough for a down payment of at least 20%. If your down payment is less than 20% of the price of the home, you’ll need to purchase mortgage loan insurance. And if you’re self-employed or have a poor credit history, you may also be required to get mortgage loan insurance, even if you have a 20% down payment. Get Preapproved for a Loan If you are confident you have enough money saved to cover a 20% down payment (as well as closing costs), you’re ready to handle the other 80% by talking to a mortgage lender. Getting a pre-approved loan shows to sellers that you are a serious buyer. It’s also a great way for first-time home buyers to get ahead in a competitive market. Your first home is a big deal – likely the biggest purchase in your life so far. Because of that, you don’t want to make mistakes. Consult a trusted real estate professional who can help you to find a home, negotiate a deal, and see the process through until closing. Comments are closed.
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Cecil Darren Frank - Toronto Real Estate AgentArchives
October 2019
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