Buying a house is a milestone most people strive for. But when the time eventually comes, not everyone is financially prepared. In addition to securing a home loan, you also need to be financially secure overall. If you’re ready to buy, but aren’t sure if you’re financially prepared, you’ll want to read on. Here’s a few tips on how to be finances stable before you buy a new home.
Browse the Real Estate Market
Before you can improve your money management and start to plan your budget, you need to know how much you’re going to spend. Since it’s the winter season, homes are usually priced to sell. That means sellers might be more willing to negotiate than during the summer. Before making an offer, make sure you have the financial wiggle room to offer more if necessary. You also to consider the following:
- Do you live alone?
- Are you planning on expand your family in the future?
- What are your must-haves?
- What are you willing to sacrifice?
Plan Your Budget
After you find the right house, you then need to think about your budget. In addition to the actual down payment, you also need to think about packing materials and paying the moving company. You also need to plan for the unexpected. This includes inspection fees, paying the title company and homeowners insurance. If you’re already on a tight budget, you need to lower your monthly expenses prior to going to settlement. Simply put, you need to look at all the extras you’re paying each month and find a way to eliminate them.
For instance, if your guilty pleasure is daily coffee runs, you could be saving hundreds each month by making coffee at home. When it comes to grocery shopping, you also need to scale back. If you always what’s on sale, just because it’s on sale, you need to rethink your shopping strategy. You also need to take a closer look at your student loans, if you have them. If your interest rate is high, you may want to consider consolidating your debt. You can use a student loan consolidation calculator to estimate how much you may save before consolidating. Debt consolidation is when you take all your pre-existing debt and roll it all into one payment. If you choose this route, skip the bank and apply with a private lender. They can offer better loan terms and lower interest rates over the course of the loan.
Prepare to Make a Down Payment
A down payment is a form of payment used to secure your new home. The details about how they work and how much you have to put down depends on both the house and what the mortgage company requires. On average, you can expect to put at least six percent of the initial cost of the house down. If possible, you should try to put down 20 percent. In fact, this is even mandated in some areas. There are some areas, however, that allow you to put as little as three percent down.