Buying your first house can be exciting and stressful. There are so many different things that you need to think of. When to buy one? How much can you afford? Where should you buy one?
Of course, you’ll need to go through the process of applying for a mortgage, that will throw up a whole other bunch of considerations.
Which are the most important things to consider when buying your first house?
Here’s a buying your first house checklist to help you.
1. Make Sure Your Credit Score Is High Enough
Before you even apply for a mortgage, make sure that your credit score is high enough. You’ll want to have a good score of between 620-660 when you apply.
You can run a credit check when you’re getting ready to buy to make sure you’ve got a good score. If you need to, you can improve your score by paying off any debt you have.
2. Have Your Downpayment and Closing Costs Saved
Before you apply for a mortgage and buy your first home, you’ll need to make sure that you have saved up enough money for the downpayment and the closing costs.
For your downpayment, you’ll need at least 5% of the total cost of the house that you’re buying, although the more you can put down, the lower your mortgage payments will be.
Closing costs are generally around 2%-5% of the total cost of the home.
3. Make Sure You Can Afford the Monthly Payment
Before you agree to take out your mortgage, you’ll need to know exactly how much you’ll need to pay each month to repay the debt. Then, you’ll need to work out whether you can afford to pay that much.
Once you know how much you can pay each month you can answer the question—How much house can I afford?
4. Get the Best Interest Rate
Shop around. You need to know that you’re getting the best deal on your mortgage. The way that you can do this is by looking at the interest rate. The lower the better.
The interest rate that you’re offered will relate to your credit score.
If none of the interest rates are coming back in your favor, you should go back and look for ways to improve your credit score.
5. Know Your Income to Debt Ratio
Before you take out a mortgage, you should examine your current debt to income ratio. This means checking out the total of all the debt that you currently owe and comparing it with your income.
The higher your debt to income ratio is, the less likely you are to get approved for your mortgage. If this is the case, you’ll need to lower your debt outgoings by consolidating debts or paying some off before applying for your mortgage.
Be Careful When Buying Your First House
Aside from the financial considerations associated with buying your first house, there are some other decisions to be made.
Work out where you want to live. How far away from work are you? Will you live close to your family and friends? All of these are important things to consider.
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