Honeymoon Finances: What to Know Before Buying Your First Home
If you’re getting ready to buy your first home, you’re probably excited and looking to include everything you’ve ever wanted inside. Whether you’re looking for a turn-key home, or a fixer upper, you still need to consider a few factors before making an offer. The following is a list of considerations you need to think about before contacting a real estate agent. Understanding your budget and all of your costs beforehand will help you avoid later disappointments.
Know Your Credit Score
Before you consider buying a home, order a copy of your credit report. You need to have good credit to purchase a home in the contemporary market. You won’t be able to purchase a home with a credit score under 640, and you have a better chance of getting a loan with a score over 750. There are some loans available for scores less than 640, but you may need a higher down payment to qualify.
Don’t Go Over Budget
To determine your monthly mortgage, don’t figure more than 30% of your monthly salary for your monthly payment. This is you and your partner’s total combined salaries. Once you’ve come to a conclusion for your budget, don’t allow yourself to go over. This can lead to a bank declining your loan and more financial problems down the road.
Don’t Forget Closing Costs
You’ll need to consider the price of closing costs in your budget too. Closing costs can be around $2,000 to $6,000 for an average house and you can figure out your exact closing costs using an online closing cost calculator. Talk to a Financial Guidance Center to come up with estimates and a plan of action for your finances.
Think about a Down Payment
Your down payment is generally about 5 to 20 percent of the total cost of your home. Depending on your credit and the price of your home, the total down payment price could go up. If you don’t have enough for a down payment, you could be disappointed later when you can’t afford a home.
Create a Back-Up Plan
Make sure you have a decent nest egg before going house hunting. You need to have a good amount of money saved up that you don’t include in the total fees like the down payment and closing costs of your home. Make sure you have a back-up plan in case you lose your job or face a sickness that prevents you from working.
Above all, have fun while buying your first home. The first home you purchase will have a special place in your heart for the rest of your life, especially if you still reside here years down the road.