Unlike any other trivial matters, buying a home is not something that you can decide on the spur of the moment. As homeownership is a big financial commitment, it is never a good idea to rush into it, just because some of your friends have done it or just because the society says it’s a sign of adulthood or being a financially responsible individual.
This doesn’t mean, however, that buying a home cannot be a wise move for the long-term. If you have your finances in order and seriously believe that you’re prepared for all the related responsibilities, homeownership may be right for you. Just keep in mind that wanting or being pressured to buy is completely different from actually being ready to purchase a home.
If you have been thinking about taking this plunge for quite some time now, it is only important to learn more about the process and know what you’re getting into before you finally commit to becoming a homeowner.
Is it the right time?
If your motivation for buying a home is “because everyone’s doing it”, then it is probably not the right time. If you, however, want to settle down or are in a good financial situation, buying a home may be a good move. As this is probably the biggest purchase you’ll ever make, you need to examine your motivations and make sure that you’re financially ready.
How will I pay for it?
Most homeowners usually need a home loan or a mortgage to afford a home purchase. Applying or getting one is not as easy as meeting a lender and choosing your preferred loan.Mortgage companies in Utah suggest learning more about the process of obtaining a mortgage, as well as the things you need to do to get your finances in order. These include:
- Reviewing and checking your credit score – your credit score affects your mortgage rate and demonstrates both your credit responsibility and worthiness.
- Creating and reviewing your budget – this is to learn where your money is going and make sure that all your household expenses don’t go beyond 28% of your monthly gross income and your debts don’t exceed 36%.
- Getting preapproved for a mortgage – this allows the lenders to examine your finances and determine how much they are willing to let you borrow.
- Saving up for or increasing your down payment – a higher down payments translates to a lower monthly mortgage payment. You can still buy a home with a small down payment, but making a sizeable one (at least 20%) can help you avoid private mortgage insurance (PMI).
Is there a right way to buy a home?
The first thing you need to do before looking for houses is to get a preapproval to find out how much house you can afford. Keep in mind, however, that the amount on your preapproval letter is the maximum figure that the lender is willing to loan you. To avoid being house poor or financial hurdles, later on, it is best to look for houses below that amount and work with a reliable realtor.
Visiting houses without getting pre-approved or setting a budget could only lead to disappointments if you later found out that the house you want doesn’t fit your finances.
You always have the final say when you think it’s time to buy a home. But just to avoid financial disasters in the future, educate yourself of what homeownership entails. You can read up online, get advice from homeowners, or talk to experts like a mortgage lender or a real estate agent.