Buying Your First Home? Here’s How to Financially Prepare Yourself

Buying your first home has the potential to be both stressful and rewarding. This period in your life is bound to come with some inherent hiccups along the way, but your finances shouldn’t be one of them.

Preparing yourself financially is one of the most important factors when considering making this big of an investment—as is learning to read the fine print of financial preparedness and prospective home ownership so you can accomplish this goal without any snags. This way, you can be satisfied with your new investment and ready to protect it with a Dublin Ohio Home Insurance policy.

Timing.

Saving up for a home is a great start to getting your dream of home ownership underway. However, if you plan on buying the home simply for an investment or for flipping, you have to consider timing. Generally speaking, if you can’t afford the home today, then don’t purchase it.

Next, experts recommend keeping your monthly mortgage payment under 30 percent of your total monthly income. Otherwise, you run the risk of becoming house poor, where it becomes a challenge to make your mortgage payments.

Prepare yourself for the mortgage application process.

First, you’ll need to know your credit score, which is the first thing any lender will look at in addition to your income verification. Next, you’ll need to save enough money for a down payment (between 3.5-20% of the purchase price) and other fees such as closing costs and inspections.

You might be on your way up the corporate ladder, but it’s best if you refrain from opening up new credit cards or lines of credit before you apply for a home loan. These ding your credit, so try to hold out on buying that new car until after you’ve been approved for a mortgage.

Finally, you’ll need to gather your important documents. When applying for a mortgage loan, you’ll need your W-2’s, bank statements, self-employment income or tax returns from the past 2 years.

Shop for the right mortgage.

There are two different types of mortgages you can apply for. There are fixed-rates and adjustable rates (ARM’s), which are priced very differently. You can take out a mortgage for 30 years or as little as 5 years (interest rates are typically higher the longer the term of the loan).

Most buyers should look at fixed-rate mortgages—the 30-year fixed rate mortgage is still the most common kind of loan by far. Still, it doesn’t hurt to become familiar with how mortgage rates work and the different kinds of loans that are available, recommends Money Under 30.

Utilize the mortgage calculators online to determine how your down payment, mortgage, and APR rate will affect your monthly payment.

Fees.

In addition to applying for a loan, you’ll need to save up money for other administrative fees such as credit checks, home appraisal, and document preparation.

Finally, you’ll need to secure Private Mortgage Insurance (PMI) if you put less than 20 percent of the value down on the home. This is in addition to regular homeowner’s insurance, so it’s important to plan ahead when deciding when to buy your first home.

About Haughn & Associates

Founded by Michael Haughn in 1986, Haughn & Associates is a full-service, family-owned, independent insurance agency based out of Dublin, Ohio. H&A strives to provide the best possible price and unique insurance solutions across a myriad of industries, including construction, IT, Habitation & Commercial Property, Agriculture, and Engineering. Devoted to providing the best of business insurance, life and disability insurance, personal insurance, employee benefits, and bonds, H&A is proof that success lies in long-standing client relations and satisfaction. To learn more about how H&A can be of service to you, contact us at (877) 802-2278.

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