Buying your own home is the ultimate goal and dream for most of us. It is a dream we work hard for, save hard for and one that is as much an emotional decision as a financial one. However, don’t let the joy and emotions of buying your first house cloud your judgement when it comes to practical and money matters. Buying a home, as much as it is a place to grow your life in and nourish your dreams, is also a major investment and one that will tie you down for a while especially financially.
Making sure you are well prepared before you begin your hunt for the perfect home will lead you to make better and more informed decisions that make the experience much, much sweeter and smoother. It is the biggest purchase most people will ever make in their lives and requires adequate thought and foresight before you do so befitting its magnitude.
Let us take a look at a few things to consider before you take the plunge –
- Figure out if you are truly ready – First and foremost you have to decide if you are truly ready for home ownership, financially and emotionally ready that is. When you are saving for a home make sure you find out what kind of down payment or deposit you will need. As a general rule of thumb a 20% down payment on the house is the norm. Apart from a down payment, home loan or mortgage and the like you will also have to factor in other aspects that you will have to spend on like property taxes and home equity loan rates . On the other side you also have to be ready to commit to purchasing a home that means you will be living in that city / locality for a substantial amount of time and planting roots so to speak. If you can’t commit to a lengthy repayment process as well as living there it may be a better idea to opt for renting instead.
- Figure out a realistic budget – Before you begin looking for a home, it is crucial to accurately decide on what you can truly afford. Consult an expert or realtor, like http://www.trianglehousehunter.com/or use budget calculators to come to an amount you know is realistic and doable. Start with looking at your household budget and see whether you can afford to make your payments of XYZ amounts comfortably. Factor in all costs like down payment, mortgage repayment, legal fees, property taxes, closing costs and the like.
- Make sure you have your savings in order – Apart from saving for the home or home loan payments, you need to see if you will have a buffer amount saved in order for emergencies. If you are planning to spend all your savings on a down payment, consider how you would manage in case of a crisis like losing your job or source of income. This buffer amount will also soften the blow if your interest rates go up.
- Get yourself pre-approved for a loan – Unless you are rolling in dough, odds are you will need to avail of a home loan in order to purchase your dream abode. After figuring out what budget and price range is ideal, figure out how you will finance it. Talk to different loan providers and check terms and conditions, interest rates and repayment policies. Also talk to an advisor to see what kind of loans you qualify for and the factors that affect an approval like your credit history and employment track record.
Home ownership can be a dream or an utter nightmare depending on how you approach it. Start with these basic financial steps to ensure a better experience.
Salil Merchant is a financial advisor in the UAE and runs his own consultancy. He advises clients on all matters related to personal finance from insurance rates in Dubai to financing a business. He regularly writes for websites and business magazines.