Jumping into the housing market is a big move, and it's one you don't want to make unless you know you can afford your mortgage payments while also making ends meet. Certain factors like your credit score and current debt, like credit card and student loan amounts, can come into play here, so along with looking for a home, you should be keeping an eye on those factors. There are three things you can also look into before you decide to go all-in on buying a home.
See if You Can Make a Good Down Payment
Probably the largest factor in buying a home through a conventional loan is a sizeable down payment. These down payments can range widely, but most of them will range from 5% to 20%. Though, if you're looking to get out of paying PMI, then you'll need at least 20% as a first time home buyer. How much you can put down for a down payment will be a good indicator of whether you're in good shape for owning a home. As stated by Forbes, the greater the amount you can put down in this payment, the easier your mortgage interest rates will be. It’s recommended to pay at least 20 percent of the home's value although different mortgages will have different requirements about what you'll need to put down.
Do Your Research on a Realtor
If you're buying a home for the first time, you may not want to do a direct negotiation with the owner if it's for sale by an owner. Choosing the right realtor could make a difference in how far down the original owner is willing to come in the asking price and how quickly the sale is able to be made. When choosing a realtor, check their license and see if they've maintained a record free of complaints; be sure to look at reviews from previous clients they've assisted both in buying and selling as well as any local awards they've received. Choosing a realtor should be a more involved process than simply walking into the closest realty office. You need to get to know your realtor, and they need to get to know you so that they can better understand your needs.
Assess Your Closing Costs
Probably the biggest challenge to tackle when buying a home is to make sure all the closing costs are covered. The list of these can be quite long, ranging from your mortgage insurance and title insurance to broker fees, realtor commissions, origination fees, lender inspection fees, and property tax-related costs. Some costs are handled by the seller, but as a buyer, you do have to be prepared to divvy up about 3-5 percent of home costs in these.
There are a lot of helpful tools out there that can help you sort out your costs and prepare them, including mortgage calculators and budget software. It's helpful to figure out good starting points for home sale negotiations and to consult someone who's done it before. You can do some pre-exploring of the market before you decide on your home.