Everyone dreams of possessing their own home. Many people put in extra efforts to reach a point where they become financially stable enough to finally purchase and build their own dream house. After all, the ideal life of an average man will be incomplete without a perfect house. Although, buying a house in general is a nerve wrecking experience, it becomes more grueling when you are purchasing a home for the first time.
Buying your first home is indeed an unforgettable experience. Where you are super excited, you are also nervous and scared. Where you have ideas flowing, making a decision as small as choosing the color of your curtains takes ages. Also, you are afraid of making wrong choices and fear any financial loss. Well, it is natural to be scared and many people do in fact end up making wrong decisions while buying their first home, if you do your research right you can avoid these mistakes. Here are some crucial things that first time home buyers should keep in mind before making their first big purchase:
Managing finances smartly
When you are heading towards buying your house you obviously have reserves, but how you manage the reserves and manage your budget makes a very crucial role. Many people end up spending too much on one or two aspects that leaves very little for other important stuff. Let’s say you have a limited cash reserve the major bulk of which you spend on down payment and mortgage insurance, in the end you would either compromise on the interior of the house or turn to the emergency fund (another important thing that we’ll discuss below). Always go for houses with mortgages that are 3-4 times your annual income.
Keeping emergency funds
No matter how much money you have in your reserve always, always have an emergency fund. It’s human nature that the more you have the more lavishly you will spend. And, even if you spend wisely, buying a house is full of unexpected turns and twists and you would be surprised at how many unplanned things you’d be spending your money on. Therefore, while budgeting for your house always keep an emergency fund along with your cash reserve. However, keep in mind that it is an emergency fund, so use it only in emergency situations. Otherwise, follow the above rule and manage your finances smartly.
Choosing the right mortgage
Choosing the right mortgage involves many factors. First of all it is essential that you choose reliable and efficient mortgage lenders. Secondly, before paying more for the mortgage consider what your long term goals are. If you plan to stay in this house for a very long time, then it is suggested that you go for a fixed rate mortgage in which your interest remains same during the course of your loan duration. If, however, you plan to move before the fixed time, go for adjustable rate mortgage in which your interest rises or falls based on the market rates. Choosing the duration of your mortgage loan is also important: many gurus believe that you must choose a 30 year plan over the 15 year plan as it provides more of a financial flexibility. If you can afford and want to get rid of mortgage payments quickly, then you may choose a shorter plan.
Things you need vs. things you want
When you are buying your home for the first time, everything seems appealing. Let’s say you are buying Spring Hill apartments from spring hill rentals. Even the unnecessary, nice-to-have things, seem to be a necessity. However, many of the choices that first time buyers make turn out to be a liability. So first make a clear distinction between things that you like and the things that you must have. If a certain design of windows suits your aesthetics while holds little significance in other areas, then don’t waste your money on it. Remember, that long after you have built your house, you will constantly need money for home maintenance and it is not always easy to cut money out of your monthly allowance for that.
Purchasing your first home is an experience no one forgets. It is full of mind bending decisions. You may make great decisions and you may also make some mistakes. If you are a little cautious and tread lightly, you will end up making way more smart choices than wrong ones.