A house is an investment that will impact your life for a great deal of time, and there is a lot of responsibility that comes with home ownership. Getting a new home and moving there involve a lot that isn’t always apparent to people new to the process.
The most important responsibility is paying for all of the expenses that come with a home, so before you purchase one, consider these factors.
Getting Mortgage Approval
Mortgages are legal agreements made between a bank and a pending homeowner. In layman’s terms, the bank loans you money in exchange for being able to buy a house.
Of course, you should notice the key word, “loan.” This means the money that a bank lends you to make a down payment for a house will have to be paid back in full with interest added. Getting approved for a mortgage has a lot of factors attached to it.
The bank will evaluate your monthly income, your monthly debt payments for credit card or student loan debt, your credit score, how much cash you can put down up front and how much square footage you can afford. There are online tools you can use to make a proper estimate of this.
Learn More: 7 Tips for Getting a Pre-approved Mortgage
Different Kinds of Mortgages/Loan Terms
Mortgages are more of an umbrella term because there are multiple types of mortgages that you will have to be aware of. Most conventional mortgages have 15-year or 30-year terms, and the most common one is a conventional mortgage, which usually gives you the best rates.
You also have to determine whether or not you want a fixed rate (keeping the same interest rate for the entire mortgage duration) or an adjustable rate (initiating with a lower rate and having the interest fluctuate over time).
Resource: An 8-Step Guide for First-Time Homebuyers
Budgeting for Common Costs
There are costs for a house that you have to consider, such as making down payments and covering potential closing costs. The bank will not just automatically loan you money to get a house.
After you have considered what you take in and how much you will have to pay for other responsibilities, you have to estimate what your ability is to pay for all of the costs that come with a house. This does not include all of the bills that you will be responsible for, such as gas, electricity, water, groceries and more.
Relevant: 5 Expenses That Shock First-Time Homebuyers
Reviewing these mortgage basics may seem tedious, but when you’re setting yourself up for a thirty-year loan, you’ll want to have all of your bases covered. Consider all of these factors when you plan out your loan, and see if you’ve got everything in order. Once you do, you’re ready to buy your first home.
