Buying a home is usually the biggest single purchase a person will make in his or her lifetime. If you’re currently preparing to make a big real estate purchase, it’s vital to consider the complexities of it. Not only are we talking about the mortgage, but the down payment you’ll have to come up with.
Here are the things you need to know about saving before you buy.
Finalize Your Home Preference
The home location plays a big part of its overall cost and that of the down payment.
Where Will You Live?
Have you already found a home to spend your hard-earned money on? Home ownership, especially if you’re a first-time home buyer is riddled with a variety of steps that you need to commit to. If you’re still on the process of choosing, consider the houses for sale in Adelaide, where you and your family can enjoy a Mediterranean climate and a relaxed lifestyle all year around.
Assess Your Buying Capacity
Before starting to look for homes, the first step is deciding what you can purchase based on your financial capacity. You also need to list your basic requirements such as size, location, maintenance, utilities, and other bills.
If both you and your spouse have income, consider finding a home where you can cover every applicable expense in a single pay check.
Consider A 20% Down Payment
Typically, it’s best to provide 20% or more when purchasing a home. At 20% down, you’ll have a quicker time getting approved for a mortgage and will be able to reduce, even avoid a Private Mortgage Insurance (PMI). PMI is an additional monthly cost for low-equity home owners.
What if I can’t give a 20% down payment? You can STILL buy a house with a lower down payment, but you will need to pay a monthly PMI. Many banks and lenders offer loan programs for first-time, low-income homeowners through government programs, so check that out too.
Start an Automated Savings Plan
After knowing how much you can afford to spend for buying your home, you can now start saving. The best option for most people is to save a part of their pay check automatically.
You may choose a fixed percentage or amount of each pay check to go directly to your savings account into an appropriate account. Save as much as you can to build up your balance and make a purchase as soon as possible.
After the painstaking process of saving and making your first home purchase, you are a bona fide homeowner! Now it’s time to build your home’s equity.
As you continue paying your mortgage, each month you’ll own more of the bought property. Over time, the property value can also increase, which will automatically add to your equity. When you decide to sell your home in the future, chances are your next down payment will be bigger than the one you started with. This is one way to build your wealth, and something you should consider as an investment strategy in the future.
Are you saving up a home’s down payment?
Saving for your first home’s down payment is both an exciting and hard phase, but once you set foot in your own home, those hardships will be gone in an instant. Best of luck!