Many people assume that a home purchase is not the best idea in the new normal. Many people are experiencing a financial setback due to the financial consequences brought about by the crisis. Some lost their jobs. Others lost their savings after they or a family got sick or died during the pandemic. But despite the recession, many are choosing this time to buy a new house.
Many homebuyers are investing because they want to live in a house that can accommodate their new pandemic lifestyle. Others want to leverage the record low mortgage rates during the crisis.
No matter your reason for hunting homes listed for sale, you surely wish to make the experience a worthy one. Know that you can do this by doing your homework, reassessing your finances, and finding a house that fits your needs. But if you want an even better home buying experience, the following are rules you need to keep in mind.
Spend Less Than What You Can Afford
Big houses, larger rooms, an immaculate kitchen, and a nice yard can easily entice buyers to buy more than they can afford. Remember that while a mortgage can make home buying a lot more affordable, you will still pay for the total sum plus interest in the long run. Spending more than what you can comfortably afford can lead to home buying regrets.
Do a personal financial check if you are not sure how much of a home you can realistically afford. Calculate your gross income. In general, the amount most people can spend on a mortgage is up to 30% of their gross income only.
By spending only up to 30% of your gross income on your new housing, you will have more cushion to pay for your other needs. You can fulfill your financial obligations. This will also give you fewer financial headaches in the future.
Don’t Skip First-time Homebuyer Grants
You can leverage grants, loans, and programs specifically offered to first-time buyers only. This enables you to find the right mortgage type, enjoy low-to-no down payment rates, and even get help to pay for the closing costs. It is crucial that you try to utilize these grants, loans, and programs.
Know that you can be considered a first-time homebuyer if it has been more than three years since you owned a principal residence. This means this is not strictly for buyers who have never owned a house their whole life. Note that every state can have varying grants and programs available to first-time homebuyers.
Save at Least 30% of the Home Value
Owning a house comes with many expenses. The things you will pay for go beyond the monthly mortgage, interest rates, and closing costs. If you don’t have enough cash prepared for the other expenses, you will only end up being cash-poor in the future.
Get a mortgage preapproval and check how much your lender is willing to lend you. Then, calculate how much you can pay for each month. Once you have these data in mind, consider the value of the house you can comfortably afford and how much is 30% of the home value.
This way, you will have an idea of how much you need to prepare in advance before buying. This will give you enough cushion in case things don’t go according to your plan. If you don’t have the 30% cash on hand, it should be somewhere in a low-risk asset.
Shop With Tech Cautiously
The pandemic changed how we look for houses and how we buy properties. We now engage in virtual tours to have a better look at the home before deciding if we wish to see it in person. We talk to real estate agents and lenders online instead of constantly setting up appointments.
We use different tools to sign, store, and send important personal information online. We even send payments to different real estate professionals instead of paying in cash or dropping by checks. While tech helps make home buying seamless, we need to be cautious to avoid real estate scams.
Always verify the details of your lender, real estate agent, and the like before sending anything. This is especially true if they ask you to include your personal information or send money asap to another account. Know the best practices of using tech when buying houses online to avoid becoming a victim of fraud.
Shopping for your new home can make you feel excited and overwhelmed. Use this opportunity to make informed decisions by doing enough research. Never take these home buying rules for granted if you want a more satisfying home buying experience.