Buying a home, and more specifically your first home is a very exciting time. A lot of people get caught up in the moment and forget about the most important step in home buying, and quickly get into trouble. Understanding the current mortgage interest rates, and your financial status is just the start. One of the first steps that i recommend is to get pre-approved from a bank. Do not confuse pre-approval with pre-qualification. Pre-approval is an actual review of your income, debt and credit history. Make sure you check your credit report before going into a bank, so you know where you stand. Filling out a buyers net sheet with your agent is also a great way to begin. Many people underestimate the costs to close a house, not to mention the costs to furnish, and fully settle in. Closing costs can add up to 7% of your homes purchase price. Some of these closing costs include an application fee, appraisal fee, credit check, attorneys’ fees for you and your lender, title insurance, a survey, homeowner’s insurance, recording fee, different taxes, and mortgage points. You must remember that the down payment is not the only thing to worry about. A basic rule to follow is that you can afford a house that is around 2.5 times your annual salary, however using online financial calculators will give you a better idea.
Purchasing a home is not all about finances. Your future also plays a major role. If you are the average home buyer and are not planing on “flipping”, then you need to make sure you are going to stay in your house for at least two years. I mention two years because of taxing purposes. Even if the market is rising you may still lose money if you sell within two years because of fees involved with buying and selling as well as the taxation of your house. When I say “may lose money”, that is one of the better scenarios. If the market is lowering, you could be in for a huge loss.