What specific features will your ideal home have?
While it’s good to retain some flexibility in this list, you’re making perhaps the biggest purchase of your life, and you deserve to have that purchase fit both your needs and wants as closely as possible. Your list should include basic desires, like neighborhood and size, all the way down to smaller details like bathroom layout and a kitchen that comes with trustworthy appliances.
How much mortgage do you qualify for?
Before you start shopping, it’s important to get an idea of how much a lender will actually be willing to give you to purchase your first home.
It’ll behoove you to make sure your personal finances are in order. Generally, in order to qualify for a home loan, you have to have good credit, a history of paying your bills on time and a maximum debt-to-income ratio of 43%.
Make sure to get pre-approved for a loan before placing an offer on a home: In many instances, sellers will not even entertain an offer that’s not accompanied with a mortgage pre-approval. The lender can pre-approve the borrower for a certain amount. Be aware that even if you have been pre-approved for a mortgage, your loan can fall through at the last minute if you do something to alter your credit score, like finance a car purchase.
How much home can you actually afford?
On the other hand, sometimes a bank will give you a loan for more house than you really want to pay for. Just because a bank says it will lend you $300,000 doesn’t mean you should actually borrow that much.
Just like with the purchase of a new car, you’ll want to look at the house’s total cost, not just the monthly mortgage payments. Of course, that monthly payment is also important, along with how much down payment you can afford, how high the property taxes are in your chosen neighborhood, how much homeowners’ insurance will cost, how much you anticipate spending to maintain or improve the house, and how much your closing costs will be. If you’re interested in purchasing a condo, bear in mind you’ll have to pay maintenance costs monthly because you’ll be part of a homeowner’s association, which collects a couple hundred dollars a month from the owners of each unit in the building in the form of condominium fees.