The prospect of owning your own home is exciting and allows you to own your own piece of real estate for many years that you can improve upon. However, along with making such an important purchase, there are some essential costs and financing details you should know about going into the process. Here are some recommendations to help you in the home buying process.
Budget For a Down Payment
As a new home buyer in the real estate market, you need to come to understand the process to buy a home with a mortgage loan, which is what most home buyers use when they make the purchase. With a loan, you are going to need to qualify for the loan funds based on your credit and income; however, you will also need to put some money down toward the purchase. Most mortgage loans will require a down payment, anywhere from three percent to twenty percent. This down payment shows the mortgage lender you are willing to put something toward the purchase and have an invested interest in keeping the home in good condition.
Keep in mind that your down payment will also reduce the amount of interest you pay on the mortgage and it will reduce your monthly payment. Some types of conventional loans will add on a private mortgage insurance premium to your mortgage payment if your loan is more than eighty percent of the home's value.
Start saving for a down payment early on, or look at your savings accounts or retirement and investment accounts. There are some types of accounts that allow you to use funds as a down payment for a home purchase without paying a capital gains tax or early withdrawal penalty. Be sure to consult with your tax or investment professional to get the most current details about tax penalties. Your realtor and mortgage broker can also help you with information and details about your down payment.
Plan For Upcoming Expenses
As a future homeowner, you also need to be prepared for upcoming costs that your home will come with. The home will require upkeep and maintenance to protect your property investment. Even if you buy a newly built home, you will be faced with wear and tear to the property from use, weather conditions, and natural conditions present in the soil and environment. And be sure to use the builder's home warranty for any issues that arise after you move in.
To help you with a new home purchase, plan to keep some funds in savings for unexpected repairs and maintenance. For example, if there is a windstorm with high winds that blow some of your roof's shingles off, you will need to be able to make the repairs to the roof.
Keep this information in mind as you look for new homes.