A house is one of the biggest purchases you're going to make in your life. And it's one of the most exciting things to look forward to: owning your own house, a place to call you own. Planning to take this head-on means that you have to start making sacrifices as it will require a big stretch in your budget. Here are a few simple tips for first-time home owners:
1.Start with saving up for the money that you will use as a down payment. A 20% DP will suffice, or with a higher amount the easier it is to get a loan, and you will have a lower monthly interest rate as you pay it off.
2.But if you can't afford to make a down payment there's a "zero-down" loan option. But as much as possible make a down payment around 5%-10% at least.
3.To get a good mortgage, you need a good credit history and show little to no debt. Try and pay down the biggest debt that you have. The bank would like to see total debt less than 35% of your income.
4.Be prepared to shell out around $500 for miscellaneous expenses. These are for loan application fees, bank fees for your entire credit report, professional home inspection and appraisal.
5.To get the most savings, try to get your paycheck automatically deducted and into a savings bank account. The automatic deduction helps you to quietly put away your money as it adds up over time. Try to practice frugality in the house as well as reduce all the household bills for electricity, water and all other services.
6.Remember that don't spend more than 3 times your annual income on a home. You need to save enough money to meet the 20% down payment as well, it's really recommended because anything less than that, majority of the lenders will require you to get private mortgage insurance (PMI), adding at least 0.5% of the loan to your mortgage.
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