Taking on a mortgage at any age is a big decision, and you need to be confident going into this that this is what you want. With so many variables and things to think about, navigating real estate and industry jargon, barriers, standards, and more finding the right mortgage for you isn’t easy.
Especially now, when mortgages are harder to come by and with interest rates still high despite a slight fall in recent months, you want to take your time preparing and looking for the right mortgage.
But how can you do this and avoid any mistakes?
Get Advice
Talk to mortgage experts, brokers, real estate agents, and anyone with experience and knowledge of the real estate market. You can talk to an accountant, financial planner, or family and friends to help you get a better understanding of what the market is like and what you can expect when taking on your first mortgage.
The more you know, the better informed you will be. The type of information you need to know can include the current state of the housing market, trends in your local area, demand and supply, mortgage acceptance rates, criteria to qualify for a mortgage, the different types of mortgages you can apply for, including how to get a construction loan if you are considering building not buying a house as well as terms sellers are leaning towards to make the sale and any issues to avoid.
Can You Realistically Afford It?
Something that can trip many first-time buyers up is being unable to realistically afford to buy a house, not just looking at the calculations on paper. Real life is often much different. Buying a home comes with additional requirements for the long term, such as being able to afford the upkeep on the property (especially if you buy in an HOA), property taxes, significant repairs, insurance, utilities, and so on.
It’s not just the monthly mortgage payment you need to consider; it’s the extra expenses on top that can eat into your budget. Ideally, your mortgage should be no more than 28% of your gross monthly income. So, if your income is $5,000 per month, your mortgage should be no more than $1,2000, but the extra expenses on top of this can cause a massive dent in your income.
Are You Ready?
A big question some people fail to answer is if they are actually ready for this commitment. Just because you can, doesn’t mean you should is a good rule of thumb to use here.
Sure, buying your first home is a right of passage for those lucky enough to be able to save up for this. But buying a house is not only a commitment to taking on a huge debt but also a big responsibility in terms of maintaining the property and living alone if you have yet to move out of your parents’ home.
Ask yourself if you can cope with having to maintain the home yourself. Are you responsible enough to make your mortgage and bill payments on time? Will you be able to afford it if anything goes wrong, and do you know what signs to look for should your home need some TLC?
Being emotionally unready and mature enough is entirely different from being financially ready, and you need to be confident you are prepared on both fronts.
Know What You Want and What You Can Afford
When the time comes to look for a property, you need to know precisely what it is that you want or need and what you won’t compromise on. Do you need to be near good transport links for work? Do you want a turnkey property, or are you willing to get your hands dirty? Know the type of property you want or will be able to handle, the amount of work you are willing to carry out, and the neighborhoods you want to live in and can realistically afford to live in right now.
This first home doesn’t need to be your forever home, but it needs to be somewhere you can afford and manage easily to help you settle into home ownership life. There is nothing wrong with looking for a starter house over a forever home, but knowing what you are willing to accept and what you absolutely do not want will help you avoid making a huge financial mistake.
Buying your first home comes with a lot of decisions to make, and for any potential buyer, the financial aspect can take over the more realistic facets of buying a house. Knowing you’re ready and responsible enough to do this should be your starting point, as well as gathering as much information as possible about the market and the process, along with knowing your own limitations, will help you to make better decisions and find your perfect first home or even forever home if you are lucky.
