collaborative post // If you’re buying a house, either for the first time or not, you might find the whole process overwhelming. A house is one of the most expensive things that most people will buy, but the investment is often more than worth it.
When you rent, you pay a set amount of money each month to live in a property, but you don’t take anything away from that when you move. But when you buy a house, once your payments are complete, you have a physical asset that you can use as a safety net.
Not only this, but your house is your own, meaning that you can decorate it and do what you like with it, without answering to a landlord. This is why so many people consider owning a home as one of their goals in adult life. Here are some tips to help you improve your finances enough to achieve this goal.
Budgeting and Saving
The first thing you need to do is to determine your budget. Consider your needs and what you can realistically afford. Look into housing prices in the area of your choice. This might be a wake-up call as houses are less affordable than they were even a decade ago.
The chances are that you won’t be able to afford to buy a house using cash, as the vast majority of people end up getting a mortgage. However, you still need to save up money to cover the moving costs and, more importantly, the deposit.
In the meantime, cut down on your expenses and set a budget for your household and your new property. Your deposit should be at least 10% of the property value of the home, but it can be beneficial to save more than that. The larger your deposit, the less you will have to pay in the long run.
Getting a Mortgage
A mortgage is much like any other loan, but it is designed to help you to purchase a property. The loan will typically be long-term, with some mortgages taking decades to pay off. Your new property will also be collateral in case you can’t pay the loan off.
Most mortgage brokers will want to ensure that you’re in a position to pay off the loan before they are willing to lend. If you have a secure job and a good credit score, as well as a healthy deposit, then you prove that you’re a trusted borrower. You can access larger mortgages or better deals that allow you to save money down the road.
On the other hand, if you have a poor credit score or some other financial issues, then it can be harder to find a mortgage. There are a number of factors that might affect your borrowing power, such as failure to pay off previous loans, but the important thing is that is possible to move past these issues, if more difficult.
Once you have a mortgage, resist the temptation to only pay the minimum amount each month, but aim to pay it off as quickly as possible so that you can own your property outright.