So you and your partner are planning to buy your own home? Well, congratulations! Whether you are newlyweds, looking to buy your first property or a long-time couple, moving from an apartment to your very own space, buying a home is a rewarding milestone for every couple.
If you and your spouse are planning to buy your first property soon, here are tips to keep in mind.
1. Don’t let your emotions play with you
Unlike deciding who to spend the rest of your lives with, buying a home isn’t necessarily something you “listen to your heart” for. While it’s nice to imagine the interior design you’re going for or how big your future child’s room would be, you and your partner need to think about it logically. You need to see it as a business investment.
2. Assess your financial situation
Whether or not you have joint bank accounts, it’s crucial to have a clear understanding of your overall financial situation if you’re buying a home together. Ask each other the following questions:
- Do we have any balances from student loans and other debts?
- What are our credit scores?
- Our spending habits and expenses?
- How much is our savings?
- How much do we owe on our credit cards?
- How much is our individual and combined take-home salary?
- How much do we plan to save for retirement?
- What are the assets we have?
The answers to these questions will dictate how much you can afford and how big the size of mortgage loan you may need to take on. If you have existing debts or unpaid bills, make sure to settle them before getting a loan.
3. Stick to what you can comfortably afford
Just because your combined monthly income can cover for the payments doesn’t mean you can go all out. Be realistic: Are you willing to sacrifice your daily comfort and happiness just to pay for that expensive dream house of yours?
Calculate other major expenses, like food, bills, transportation costs, and leave some allowance for emergencies. Don’t forget to put money into savings, emergency funds, insurance, and other investments.
Generally, you should spend no more than 30% of your gross monthly income on housing. You’ll only need to save for a down payment of anywhere from 5% to 30% of the home purchase price.
4. Know your credit scores
Planning to get a mortgage loan? Before talking to a lender, make sure you know your credit scores. Since the interest rate, you may qualify for depends on your credit rating, work to clean up your credit reports to increase your scores.
5. Get prequalified for a home mortgage loan
Before starting house shopping, make sure to get prequalified for a home mortgage loan.
The real estate market can be competitive, and you need to act fast once you find a potential home. Getting pre-approved will assure your property agent and potential seller that you’re a serious buyer and you’re able to get the necessary financing.
Getting prequalified for a mortgage will also help you determine how much you can afford, so you can narrow down your options and not waste your time and energy on properties outside your budget.
6. Know your loan options
Your financial status and credit history may dictate the type of home loan for which you may qualify. You may need to show lenders your pay stubs, tax returns and credit scores.
You’re likely to get better terms if they see you as a lower-risk client, having a stable job for several years.
7. Talk about mobility and your future
Do you plan to raise your family in your current town and stay in one home until you grow old? A 20-year mortgage may be applicable. However, this setting doesn’t apply to all.
If your current career path, lifestyle, and relationship, could relocate you to another town or country in the next five years, think carefully about purchasing a home. You may need to explore other loan types, like an adjustable-rate mortgage with low interest in the first few years. You may also come out better financially by renting.
8. Choose your agent wisely
Once you have an idea of how much you can afford, where you want to live, and what kind of home you’re looking for, it’s time to find a real estate agent.
A good property buyer’s agent will help you understand the costs, and help you negotiate the right price. They should be familiar with the area in which you’d want to find a home. It’s also important that your real estate agent is easy to reach and communicate with.
Carmina Natividad is a resident writer for Bridge to Bricks Property Buyer’s Agent, a leading property buyer’s agent in Sydney. Her fondness for architecture and interior design makes it easy for her to write inspiring pieces of content about real estate and home improvement.