Want to Buy a Home? Figure Out Your Financial Capabilities
A lot of people are struggling to get onto the property ladder in any meaningful way these days. Many would go as far as to call this generation “Generation Rent”. (Although it’s worth pointing out that really only one generation in the UK and in North America had a house-owning majority!) Whatever the case, there’s no denying that the decision to buy a home is a big one, and, if you’re smart, you’re probably still umming and ahhing about it!
If you want to make sure you go about this the right way, then you need to review your finances properly, and ensure that you nail the art of landing a mortgage correctly. Otherwise, you might be setting yourself up for a bunch of problems down the road.
Your financial situation
One thing is for sure: you shouldn’t be buying a home if you’re already in debt. A lot of people think that a home will help alleviate their debts in some way as it puts them in a more stable position. But paying off a mortgage – which, remember, would be yet another debt, and probably your biggest one yet! – is often more expensive than paying rent for a leased property. If you’re not comfortable financially, with at least 20% saved up for a down payment, then you should probably put off buying a home for now. Otherwise, you’re just going to end up in an even more precarious financial position than before. Home ownership won’t solve all your problems!
Figuring out if you can actually afford a mortgage isn’t as easy as some people think. It’s not just figuring out whether you have good credit. You should probably have a substantial amount of money ready, for both the downpayment and the first few months of repayments. Your current situation is going to affect how you can borrow and on what terms and conditions. You should probably look into figuring out how much you can borrow with a mortgage calculator. If you don’t think carefully about this now, then you may end up biting off more than you can chew.
Shop for a mortgage first
A lot of people make the mistake of looking for a home they want, finding out the price, and then trying to get a mortgage that will let them afford that home. This is the most expensive way you can go about it. The safest thing you can do is shop for good mortgages first. Figure out how much you can get, then look for a home in that price range.
Of course, there are other reasons to shop for the mortgage first. If you find a home that you love and then try to figure out the means to get the finances for it, then you’re probably not going to get the home at all. Someone else who already has their finances in order is going to come along and snatch the place from under your feet. So you need to find a mortgage before you shop for homes for at least two very important reasons!