Knowing the Basics for First-Time Homebuyers
Getting your finances in order is essential if you want to become a homeowner, although first-time buyers will need advice and guidance to put themselves in the best possible position.
With that in mind, here is an overview of the basics of money management that should set you on the path to purchasing a property without falling foul of common mistakes.
Build a Down Payment Through Budgeting
Saving for a deposit early, will put you in a better position and be better equipped to take the plunge when the time comes.
Building a deposit is much easier if you get serious about budgeting, as you can only grow your nest egg if you know how you are spending your money at the moment. You can make a simple budget in a spreadsheet, factoring in your salary alongside the essential outgoings you have each month, such as things like rent and utility payments. You can also analyze any non-essential expenditures and see whether there is space to cut down on your spending so that more cash can be allocated towards your deposit.
Of course, your budgeting efforts will be made easier if you use specialized software to do this. Stewart from Paperless Pipeline – a real estate transaction management software – mentions that aspiring homeowners should leverage all the digital tools at their disposal to track their finances since this will better prepare them for the rest of the property purchasing process.
Paying down debt
Connected with your deposit-building efforts should be a desire to pay down any debts you have. This is not only necessary if you want to have more cash to put aside for your dream home, but also because the less debt to your name, the better chance you will have of getting your mortgage application approved.
Improving Your Credit Score
Another of the main factors which come into play when determining whether or not lenders will be willing to provide you with a mortgage is your credit score, which is calculated based on your credit history. Your credit score can be calculated in many different ways. One common misconception is that you should avoid taking loans or using credit cards altogether. In reality, the opposite is true; credit agencies and lenders alike will want to see that you have a history of using credit responsibly. This means that you should build your score by paying off debts according to any deadlines that apply, as missed payments will cause your score to tumble.
Consider Other Costs
Lastly, first-time buyers should also take the various costs that come with homeownership into account on top of the likely monthly repayments on their mortgage. From insurance and utilities to repairs and maintenance expenses, you need to adjust your expectations according to how much you can reasonably afford to pay out each month. And if you are not ready to commit, always remember that being patient is better than rushing into such a monumental decision.
Tiffany Vondran
Fulton Grace Realty
Real Estate Broker
773-459-8479