Making a monumental investment, like buying a home takes a lot of planning. If you are considering purchasing a house, the first thing you should do is talk to a lender. Being preapproved for a loan does not mean you will buy, it just allows you to have a realistic look at what you can afford with your finances.
When you’ve established how much money you are working with, you will have a better idea which market you can look at homes in. You may be dismayed at the quality of home your money can buy, but with some flexibility you might be able to find something suitable within your reach by looking at something smaller, or houses in different neighborhoods.
One of the first things you may need to do to be able to afford a reasonable interest rate on your mortgage will be to repair any damaging credit. By getting a copy of your credit report, you can focus on problem areas. Paying off credit card debt and high interest loans will raise your credit score thus allowing you to get loans with lower interest rates.
When purchasing a home, most people don’t look further than their monthly mortgage payments. This is the number one mistake. Be sure that you include taxes, home repair and general upkeep in your budget. Unlike renting, your landlord will not rush in to fix a burst pipe for you, be sure to set aside money for emergencies like this.
In addition to emergencies, understand you will have to pay for a gardener, or do yard work yourself. Build into your budget money for repainting, re-roofing, and making any home improvements that are necessary.
Factoring in utilities is crucial. As a renter myself, I am shocked by how much more home owners pay in just general electrics, water, sewage, trash and gas utilities. Remember heating a one bedroom apartment is drastically different than heating a four bedroom home.
The water bill is one of the largest sticker shock for first time owners. Most times, this is included with your rent. When factoring in sprinklers, dish washers, and washers, your bill will peak at new levels.
Factor in extras that may seem appealing, but come with a hefty price tag. Although a pool is a nice selling tool, think about how much water, heating, and treating your pool will cost. Can you afford it? That lovely garden in the back will need a lot of upkeep and may need to be replanted each year which can be expensive.
Last but not least, think about decorating and furnishing your home. Living in a mansion with a single futon and a cardboard box for a coffee table gets old. Make sure that you will be able to at least minimally furnish your apartment as needed. Appliances such as washers, dryers, ovens, and refrigerators are expensive and most homes don’t have them. Be sure to plan on getting these necessities.