What to Do When Financing Your Home

OCT 28

It’s easy to see the upsides of buying a home and owning something that’s truly yours — once it’s paid off. From now on,any renovations you want to make are up to you, and you no longer have to ask permission to paint a wall or hang up art. Your home is truly your space.

Finding a house and making it your home is exciting, but a lot more responsibility is thrust upon you, financial or otherwise. Whether you’re buying for the first time or going through the process again, here’s some information you can use to improve your financial standing during the process of home buying.

Preapprovals All Around

It’s always fun seeing what’s available online or driving around your favorite neighborhood, imagining where you’d set up yourhome office and how you would arrange your furniture. But there’s no reason to spend your precious time looking for homes that are outside your price range.

As long as you have a healthy or low debt-to-income ratio, enough savings for a down payment, and a decent credit score, you’ll most likely be able to secure a mortgage preapproval. According to MagnifyMoney, you should apply fora mortgage preapproval when you’re truly committed to buying, not window shopping. Sellers take preapprovals seriously, so apply for preapproval to give yourself an edge over other potential buyers when the time is right.

Don’t view the preapproval as your budget; the goal is not to use every bit of the money you’re approved for. Stay within yourmeans so that you can continue saving for other future investments.

Savings Go a Long Way

The cost of becoming a homeowner is sometimes glazed over by agents, lenders, and your own excitement. You’ll want to have saved enough for a hefty down payment with some money left over in savings for future costs associated with homeownership. So when you’re buying a home, be sure you can continue putting money into your savings.

A big difference between renting and buying is“sleeper costs,” according to HGTV. These include property taxes, utilities, and HOA fees that are often factored into your monthly payment when renting a property, so you forget they exist. Use a home cost calculator to calculate monthly costs to make sure you know the true cost of home ownership.

Ideally, you should have the home appraised,inspected, and then looked over by a contractor, who can give you a realistic estimate on any repairs the home may need. Estimates can be used in your negotiation with the home seller on a selling price.

Before you buy a home, save money by putting at least 20 percent of the total price down so you don’t have to purchase mortgage insurance. Private mortgage insurance premiums range from below one percent to above two percent, and — assuming yours is 1 percent — you could save about $166 a month on a home priced at$200,000. That’s $2,000 a year you could save by putting more down.

Settle On a Home, But Not the Terms

You can decide which house to buy, what lender to go through, and how you’ll decorate. Once you settle on a sales price, there are still things that can be negotiated and evaluated.

Always have your property surveyed so you know exactly where it ends and begins. Depending on when it was last surveyed, you may have been given incorrect borders. It’d be great for you to gain even a few more feet in your backyard, right?

Closing costs can be negotiated with the seller as well. Anywhere from 2 to 5 percent of the sale price can be expected at the closing. Discuss splitting these costs with your real estate agent, and see how he or she feels the seller will take your request.

Buying a house isn’t as easy as it seems, but the hard part — maintaining your credit and budgeting for a home — will be done before you ever get to closing. Be prepared for push-back, and don’t be afraid to ask for what’s fair. You just might end up in your first home if you do.

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