When you finally decided to have your own home, most probably, you want to have your dream house. You want to find a property that will reflect what you want. Therefore, you have to prepare for it. There are many decisions you need to do to ensure that your first home purchase is successful.
In a way, these preparations apply to all types of home loans; it can be for a mortgage loan, construction loan primary residence or even a renovation loan. Thus, you will see here the importance of all these preparations. They are necessities if you want to have a comfortable mortgage payment in the coming ten to thirty years of your life. Yes, that is right. A home loan is one of those with the most extended repayment terms.
Prepare a Budget
First of all, you need to prepare for a budget. You may not have it now, but you need to know how much in total are you willing to spend for a house. How many years is your target to pay it off? How much can you afford to pay every month at this time? How about in the future. You need to take into consideration whether or not you are planning to have a family or expanding your family in the future so you can estimate your expenses. You can also use a loan calculator to do the math for you.
Save for Down Payment
Once you have decided on how much you are willing to spend, you need to prepare for your down payment. If you have been planning this for some time, then you might have already saved up some money. However, if not yet, then better start doing so. The usual down payment required is twenty percent of the total cost of the house. On the other hand, there are some that require more or less than twenty. However, we strongly advise you to go for a higher down payment, so there is a lesser principal to pay monthly.
Before you consider taking out a considerable amount of loan such as that of a mortgage loan. You have to take into consideration all the other investments that you have. If possible, pay them off first or if not, then at least make sure that you reduce them. If there are many, pay off those with higher interest first. Another option is for you to consolidate all your loans so you will have just one payment per month.
Fix Your Credit
Your credit is also a critical consideration. Try to build up your score to at least 640 since that is the usual minimum requirement for loans. Although there are some that may require a score higher or lower than that. It is also essential that you try to make sure that you have a good credit history. Adverse credit reports stay on you for seven years so it could affect any future transactions.
Have a Stable Job
Another thing you must have is a stable job to ensure you can make your monthly payments. Without a steady job, it could get challenging to receive an approval too.
Also read: Tips for Buying Your First Home—And Mistakes to Avoid