If you have ever talked to other about buying a home, chances are someone has made reference to being “house rich, pocket poor”, meaning the owner has purchased a beautiful home that is far more expensive than they could afford.
With a high mortgage, they have no savings or residual money because all their income is going towards their monthly payments. Unless you work with a skilled mortgage specialist, the reality is that it leaves you very limited with what you can and cannot do.
The other problem with living paycheque to paycheque is that you are not prepared for unexpected emergencies or financial setbacks. You could risk losing everything should your household bills become unmanageable. To avoid this disaster, it is important to have a solid plan before purchasing any real estate property. Talking to a financial advisor or broker is a great way to make sure you are financially ready to take on the debt and responsibility that comes with home ownership. If you are considering shopping for a home, these tips will help you prepare financially.
1. Save, Save, Save
Buying property is not a spontaneous decision. Most shoppers have been thinking about this move for a long time. But during this time, you should also be doing more than just thinking about it, you should be saving for a home as well. The more money you have tucked away and ready to invest, the less debt you will have when the time comes to purchase your property.
Most lenders expect a minimum down payment of at least 20% of the actual price but the more you can put onto the cost, the better, so start saving earlier rather than later.
2. Consider Everything
Acquiring a new home comes with other financial expenses that individuals do not even consider when looking at real estate. Taxes, down payments, legal fees, entitlement transfers, insurance, moving costs, unexpected repairs, and renovations are part of the added costs you will have when making a large buy. Before getting a realtor, talk to a money expert to go through everything so you will know exactly what you are getting into before you invest.
3. Long term Commitment
Getting a house should be viewed as a long-term commitment. While unexpected things happen in life, the place you choose should be somewhere that you want to live in for a number of years. Therefore, consider where the property is, the investment you are making, the length of time you plan to spend in the place and your expectations as a property owner. If you are not planning a long-term stay in the abode, perhaps purchasing property is not your best option.
4. Do Not Over Spend
The market has been very competitive in many cities with bidders offering far more for a home than what it is worth or what they can afford. While it can be difficult, it is important not to get caught up in the housing war frenzy or you could end up paying more than you intended. When planning your financial limit, setting your allowable budget at the lower end of your approval rate is always better to reduce your debt.
5. Take your Time
Buying a home is a huge investment, one that requires time, planning, and care. Take your time, look around, get to know the market and talk to professionals. The more prepared you are and the more you understand, the better the experience will be.
Planning and preparation is vital when making any large purchase. Buying a home is one of the biggest expenses you will incur. Saving and planning for the monumental buy will help reduce your debt and keep your money in your pocket.