It can be stressful buying a home, but you can make the process less overwhelming with a little preparation and knowledge. From my experience and a lot of research, I learned a few things that helped me purchase my second home that I wasn't aware of when I purchased my first home. I want to share them with you to ensure you know what to expect and prepare for this significant purchase.
Stay "Well" Below Your Budget
It can be easy to fall into the trap of purchasing at the very top of your budget, but this could cause future financial worries. You want to leave some wiggle room in your budget for home maintenance, emergencies, etc. If you buy a home that will stress your budget to the max, you may not be able to cover any unexpected expenses, leaving you at the mercy of having to borrow from others or charge up a credit card. Stay well below your budget to ensure you can weather these emergencies.
Have a Down Payment
Unless you are a veteran, you want to have at least 20% of the home's cost as a down payment. This allows you to avoid unnecessary payments for private mortgage insurance (PMI) and could save you $100 or more each month on your mortgage payment. It can also make the loan process easier because lenders look at a large down payment as a good thing, and it increases your chance of approval.
Know Your Credit Score and Budget
Your credit score is something you should know. Even before you talk to a real estate agent or a lender, you want to know where your credit score falls. A minimum score of 620 or better is needed to get a decent interest rate on your loan. It would be best if you also had a handle on your budget. If you don't know how much you are spending, how will you know how a mortgage payment will fit into your monthly spending?
The process you go through when you buy a home can be an exciting experience and is indeed part of the "American Dream." However, if you are not financially prepared to make this decision or have not done your research, a house payment can be detrimental, and the search can be frustrating.
Knowing what you can afford before you even start looking at homes and talking to lenders can take some of the frustration out of the process and ensure you will not overspend on this significant purchase. Save for your down payment, stay well below your budget, and work on your credit score to make sure your home purchase process is as smooth as possible. Only when you spend responsibly will you truly be able to enjoy your home.