Below, we provide some valuable tips to help you financially plan for buying a new home.
Save For Your Downpayment
The earlier you start saving for a down payment when buying a new home, the easier it gets.
Even if you aren’t ready to buy a new home just yet, put aside even $50 or $100 per month into a new home fund.
Most mortgage lenders require 20 percent of your home’s purchase price as a downpayment. If you’re unable to save this amount, you would need to get private mortgage insurance, which allows you to put down as little as 5 percent on a loan.
Shop For The Best Mortgage Rates
Before buying a new home, do your research and shop carefully for the best mortgage rates and loan options as rates available to you can vary significantly from lender to lender. Even half a percent point less on your mortgage rate could save you thousands of dollars in mortgage payments over the years.
To qualify for the best possible mortgage rates, you should have an excellent credit score. You can improve your credit score by paying down debt and paying all your bills on time every month.
Generally, lenders prefer to have your debt obligations, including your new mortgage, to represent a maximum of 43 percent of your income.
Find a Suitable Homeowners Insurance Policy
You will also need a homeowners insurance policy when buying a new home.
This type of insurance protects your home against damages to the house itself, or to the possessions in the home. Homeowners insurance can also provide liability coverage against accidents in the home or on the property.
Do your research and find a policy which suits your needs. Buying a new home is one of the biggest investments you’ll ever make so make sure to consider the quality of the policy and its coverage insurance. If you ever need to file a claim, you’ll be glad you got the right policy to help protect your home.
Build an Emergency Fund
No matter how well you budget for upcoming expenses associated with buying a new home, don’t be surprised if unanticipated extra costs occur.
For example, expenses like larger utility bills and home repairs can start to add up and can make a huge difference to your monthly budget.
Build your emergency fund for several months or even years before buying a new home to prepare for unexpected expenses.
Buy Only the Home You can Afford
When you first apply for a mortgage your lender may want to let you borrow more than you really need. However, just because you qualify for a more expensive house doesn’t mean you need one.
Owning a home you can comfortably afford means you’ll have lower mortgage payments and utility bills.
Buying a new home is a major milestone in your life and you can make the process less stressful financially if you follow the guidelines described above.