Buying a house is a huge financial undertaking, and for people who can’t afford it, hope is not lost at all. Homeownership is a real possibility — if you're willing to compromise. In this post, we listed steps and tips on how you can afford your dream home.
Set your budget.
Having a real and tangible budget in mind will help you choose the best house in the market. To get the right estimate of all the expenses, consult with professionals or talk to your builders. But here’s a rough outline of what you should include in your budget:
- Land price
- Real estate commissions
- Moving expenses
- Local fees and taxes
- Planning Fees
- Site cost
- Building cost
- Finishing costs
- Landscaping costs
- Interior decorating and furnishing
- New costs of furniture
- Contingency budget
TIP: Budget more than you expect. Unforeseen money allocation can cause a real problem if disregarded. For one, setting up your home warranty is crucial when buying a new home. A home warranty can cover every product in your home and more. It will save you a lot of hassle, headaches, and money in the long run. Read this Top 5 Home Warranty Companies of 2018 to help you easily compare options.
Earn a lot of money.
There’s no way around it — homeownership is expensive. It’s why renting an apartment or renovating your existing house is the usual choice when it comes to financial decisions. But for some of us, that is not enough. We love having our own places that we can call home, so this is the problem, my friend. Homeownership? Expensive. You probably already know this: money can’t buy happiness, but it can buy a house. Long story short — earn a lot of money. Get a job, do side hustles or start your own business. But let’s be honest — not everybody can earn enough money to buy a house. Luckily, you can…
Get a home loan.
Getting a home loan at this point is a common practice in the homeownership scenes. But it doesn’t mean it’s easy. First things first, let me explain the concept of a mortgage. Basically, it is an agreement that allows a borrower to use the property as collateral to secure a loan. In a nutshell, your lender can take your properties in foreclosure — forcing you to move out, so they can sell the home. Here are some mortgages you should check out:
- Conventional mortgages
- Jumbo mortgages
- Government-insured mortgages
- Fixed-rate mortgages
- Adjustable-rate mortgages
Improve your credit.
To start applying for a home loan, you need good credit. It is one of the biggest factors in determining your loan terms. You can get a credit score. If the report says it’s good, congratulations! If its bad, it’s high time to repair it. You can reach out to your creditor and see if there are any incorrect listing. Or avoid hitting your credit limit in the meantime (or make it a habit) Remember: the higher your score, the lower the interest of the loan you’ll get.
Get a pre-approval letter.
Get a pre-approval letter before you go house hunting. Pre-approval can help you to get the home you want. Simply put, it is a recommendation letter from your lenders saying that your employment, income, and credit status are all qualified for a home loan. Once you are pre-approved, it will limit the type of mortgage you can handle. Use a mortgage calculator to help you work out your budget.
Prepare a large downpayment.
Think ahead of your home loan. A smaller down payment may cause a larger monthly mortgage and even a larger total amount of property, so if you have the money, hand out a large down payment. For some cases, you need to prepare a 20% down payment to proceed with the mortgage loan.
Ask help from the professionals.
Buying a home is dizzying, right? That’s why there are professional lining up ready to help you. Financial advisors can help you set savings and repayment goals based on your income. Home agents can find you the best home loans suited for your net worth. All you need to do is ask.