The high demand for housing and the rising costs of real estate can make the process of purchasing a home seem extremely daunting to prospective first-time buyers. Nevertheless, investing in a home is an excellent way to build equity while paying for your living expenses. With a strategic purchase, owning may not cost more than renting.
So long as reasonable financing solutions are available and buyers exercise good due diligence about home buying opportunities, property ownership can put long-term financial goals closer within reach. Here are some tips for people who are currently renting and considering whether it is feasible to buy a home.
Study the Housing Market Thoroughly
Throughout many areas of the country, the price of homes has increased considerably. The change is particularly noticeable in urban and metro areas where homes with relatively little square footage or desirable features can sell for large sums. In order to make a well-informed decision about a home’s value, it is important to have a good sense of where it stands relative to comparable homes in an area.
Do a market survey of all of the properties for sale in the area. Look closely at how asking prices compared to recent sales in addition to assessed values. Don’t rely wholly on a realtor’s input about what type of value a listing has. Do some of your own research so that you can be confident in your evaluation of properties.
Stay on Top of Your Credit
Your ability to get a mortgage or other financing options for a home may depend largely on your personal credit. If you haven’t checked your credit score in a while, it’s important that you review your score and also get a full credit report.
You certainly want to avoid learning about a mistake when a potential lender is running your credit. Instead, check out your credit status yourself so that you can get to work on correcting mistakes or taking steps to raise your credit well before a third party is going to be scrutinizing your score.
Be Sure That You Fully Understand Loan Terms
Getting the funds that you need to purchase a home involves creating a very long-term obligation. Before finalizing a loan agreement, it is imperative that you fully understand what you’re committing to. The 2008 housing market collapse was partly attributable to the fact that the terms of loans were not easily understandable. To some extent, this happened because lenders veiled terms or used language that was purposefully unclear.
Nevertheless, every borrower is responsible for understanding what they are committing to. Make it a point to seek out opportunities from lenders who have a reputation for exercising responsible lending practices. Read contract clauses thoroughly and be able to identify your repayment schedule in its entirety. Be particularly attentive to the potential implications of variable or shifting interest rates and how they would affect your monthly payments.
The high price tag on a home that you’re really interested in getting may prompt you to reevaluate your monthly budget and try to make a big purchase more manageable. Of course, you may find strategic ways to cut costs somewhere in your budget. However, you have to be pragmatic about your budgeting. Don’t make any part of your ability to make mortgage payments dependent on contingencies or trying to go without too much of what you reasonably need.
With research and preparation, you can make a home purchase that you’ll be happy with for years to come. Don’t skip out on anything that you can do to make a home purchase more attainable. Your preparation is going to take some time and work, but it may be highly worthwhile and gratifying.