Home ownership is a dream for many people, but saving for a down payment can be the biggest obstacle. In many cases, people don’t even know where to start and whether they can afford a home in the first place.
If you feel this way, you need to have a simple plan of five steps to get closer to your dream home. Be warned, however, you might end up delaying the project for a while or be surprised that you can buy a home sooner than you think.
Here are the steps you should take to buy a house in 2018:
1. Know how much home you can afford
Reach out to one mortgage lender or more and get a pre-approval for a home loan. If you go through the process, you will likely know how much down payment is required and the loan amount you would qualify for.
Based on this information, you might be able to come with a more realistic time frame for your purchase. For example, if you find out that you only qualify for homes that are not in your favourite neighbourhoods or below your standards, you might want to opt for waiting several months or years to make a purchase that is satisfactory.
2. Know how much it costs
Home ownership can appear cheaper than it actually is. For example, you may notice that your mortgage payment is well below what you’d pay for rent in the same neighbourhood. But the costs don’t end there. Factor in other costs like insurance, taxes, maintenance, repairs and loan costs to get a realistic picture of what you will end up paying.
In addition, think of the costs after a year or two. Will you need to replace a roof or do any other major repair? Have a clear idea of how you will pay for these extra costs if they become a must. Going for a home that is relatively affordable, but getting stuck on big-ticket repairs can adversely impact your financial standing.
3. Know the right time to buy the house
Understanding your time frame is essential. It will take you time to look around and find a home that is the right fit, if you are ready to buy right away. If not, think of all the changes that might happen in between. For example, will the same house you have in mind work out for you in a couple of years? Will you need a bigger house or a different neighbourhood? Knowing your time frame and the potential changes can help you plan for the right home.
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In addition, understand your market to know when it is best to buy a home. For example, if rates are rising, you might want to expedite things to ensure that you lock the lowest rate you can get on your mortgage. If there are indicators that home prices are depreciating, waiting for several months could be a good strategy to ensure that you get the best deal, the lowest mortgage rate and you don’t lose property value right away.
4. Get yourself organised
Buying a home is a big undertaking and financial commitment. You can get the best deal on your mortgage and investment by planning ahead. For example, pay down any other debt and improve your credit standing to get a better mortgage rate. Shop around to find lenders and loan options that could save over the life of your loan.
In addition, know exactly what you’re getting yourself into. Unless you’re willing and able to hold the house for several years, you might end up losing money on it if you have to sell it soon after buying. The best route is to look into your circumstances and see where home ownership fits before you jump into it.
By Rania Oteify
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