Whether you are a first-time buyer or an experienced homeowner, buying a new home can be one of the most rewarding investments you can make—and it can also be one of the most stressful.
Before you dive headfirst into home ownership, it is important to prepare and be aware of what to expect throughout the home buying process. To help, some of our experts at Sabal Homes have compiled a breakdown of some of the key steps you should follow before you purchase a home:
1. Review Your Financial Situation
It is no secret that buying a home can be expensive. That’s why you need to closely review your financial situation before you even think about purchasing a home.
Lenders pay close attention to your income, debts, assets and liabilities to make sure you don’t exceed the maximum debt-to-income ratio. This ratio will typically vary by the type of mortgage lender and loan program you are using, however, the number generally ranges between 40 and 50 percent.
Lenders also look at a buyer’s credit score. Buyers with scores above 700 tend to get the best interest rates. If you are unhappy with your score, take steps to strengthen it. Also, as a general rule of thumb, you should stop applying for new credit a year before you apply for financing.
2. Set Your Budget
In addition to the monthly mortgage payments, there are a lot of costs to home buying that many people are not prepared for, such as closing costs, down payments, new furniture and moving expenses. Plus, many homeowners forget to account for the general maintenance and upkeep of their home.
To establish what you can afford, create a monthly budget that covers the upfront and continual costs of owning a home—including utilities, property taxes and home insurance. This will help you determine what your price range is and get you one step closer to finding the home that’s right for you.
3. Save…Then Save Some More
Remember that old saying, “Pay yourself first?” If you are looking to buy a home, this practice is absolutely crucial.
Depending on your credit and financing, you will typically need to save between 3 percent and 20 percent of the home’s price for your down payment. It is also estimated that you will typically spend 2.5 to 3 percent of your home’s value annually on repairs and maintenance fees—so save accordingly. The more you save upfront, the more flexibility you will have when it comes to maintaining your home.
4. Find A Home, Not A House
Throughout the home buying process, everything may start to feel very transactional in nature. However, it is important to remember that you are not only investing in a house, you are establishing a home.
When you are searching for a home, look for one that not only suits your lifestyle now, but will also fit your lifestyle down the road. Many people make the mistake of purchasing a home based on where they are in their lives today, forgetting that this is where they can live and grow old. It is important to picture yourself five or 10 years from now and ask, “Will I still be happy here?”
Have more questions or want to get started on finding the home that’s right for you? Contact us today.