Whether your dream home is a downtown bachelor pad, a suburban family home or a farm in the country, there’s no denying that buying your first place is a big deal. Here are a few tips to help you get ready for what could be the biggest purchase of your life.
Be ready to commit – Consider using the “five-year rule” when buying your first home. Unless you’re sure you want to live there for five years before selling, renting might be a better choice for you. Don’t forget: You have to have lived in your home at least two of the five years before selling to avoid the capital gains tax.
Where to start? Most lenders have a minimum credit score requirement. If yours is low, find out how to improve it. Order at least one credit report to see if anything needs to be cleared up, such as identity theft.
Open a savings account – From the down payment to closing costs, buying a home includes upfront expenses for which you need to be prepared.
Know what you can afford – Create a budget incorporating all the additional costs that come with being a homeowner (property taxes, HOA fees, etc.). Calculate your potential mortgage payments. Most financial advisers recommend not spending more than 28 percent of your monthly income on housing.
Before you shop: Get pre-approved for a mortgage (not to be confused with a pre-qualification) before you step foot in the first house. Pre-approval can sometimes give you leverage against other interested buyers.