Three Questions to Ask Yourself Before Buying a House
Have you thought about purchasing a home this year? Homeownership is a dream for many Americans, but many are unsure of the right time to buy. Can you really afford a mortgage payment? How much mortgage can you afford? How much do home repairs cost you? These are all common questions that first time home buyers have. Additionally, according to data collected in September of 2016, 59% of homeowners wish they understood the terms and details of their mortgage better. Avoid going into a mortgage uninformed. Instead, consider your financial situation and if homeownership is right for you.
What is your current housing payment situation?
It is important to first consider your current housing payment situation. Are you still living with your parents rent free? Do you pay high rental fees for an apartment downtown? Taking into consideration how much you are currently paying will help you evaluate your ability to pay even more. For some, especially those paying high rental fees, obtaining a mortgage could actually be a reduction in housing payment. If you are still living at home, you will need to evaluate if you are ready to take on a monthly mortgage payment.
The best way to evaluate your ability to make a mortgage payment is to work with a mortgage lender. They will run your information including your income, assets, and credit, and will give you a pre approval amount. From here, you calculate your estimated monthly payment based on the amount of house that you choose to purchase. This is the best way to decide on a home loan amount that you can comfortably afford. As a general rule, you should never take out the maximum amount of home loan that you are previously approved for.
How much do you currently have in savings?
It is not only important to consider how much you can afford monthly, but also how much you currently have in your savings. Not only will you have to put down a down payment on your home loan, but it is also a good idea to have an emergency account for any needed housing repairs. According to the 2017 Home Buyer and Seller Generational Trends Report conducted by the National Association of REALTORS, 13% of all buyers cited that saving for a down payment was the most difficult step in the home buying process. Avoid rushing into a home purchase until you have a good amount of money in your savings account.
What is your housing knowledge?
When you have a rental, you often don?t have to worry about things like repairs, maintenance, or upkeep. If something breaks in your property, you simply call the property owner to schedule a paid for repair. While you do not necessarily have to know the ins and outs of housing repairs, it is a good idea to have basic repair knowledge. Additionally, the type of mortgage that you choose might affect your housing repair situation.
One of the benefits of FHA loans is that they protect their investment. They do not want to offer a home loan to a first time home buyer and then have a major repair come up. This can prevent the home buyer from making their payments, which ultimately affects their profitability. For this reason, FHA loans require an inspection prior to moving in. If the house is not livable, the loan will not be approved. The FHA loan provider might require that the seller make certain repairs and renovations before closing on the house sale.
First time home buyers are a unique type of buyer. They are often confused and overwhelmed at the buying process. According to a 2016 survey, approximately 35% of home buyers fall into the first time home buyer category. Before rushing to close on a house, it is important to understand your financial situation and ability to make the mortgage payments as well as any required housing repairs. Choosing an FHA loan has many benefits, with one of the most important ones, protecting both the loan and the first time house buyer.