If you’ve been saving up for the last few years and finally feel like you’re ready to buy your first property, you’re no doubt incredibly excited. Getting into the real estate market, whether as a homeowner or an investor of a property that you rent out, is a wonderful step and part of the American dream.
However, to ensure your dream doesn’t turn into a nightmare, it’s important to take certain steps and do what you can to plan and prepare. Here are some tips you can follow today to make the purchase and ownership process go more smoothly.
Treat Your Investment as You Would if It Were a Business
For starters, it pays to treat your investment just as you would if it were a business. By viewing the transaction this way, you’ll be much more likely to look at housing options objectively and be on the lookout for red flags.
Although buying your first home can certainly be an emotional decision, try not to let your emotions run away on you and give you blinders, prohibiting you from seeing the faults with a property. When comparing options, make sure you are fully aware of the pros and cons of each.
Stay in control by setting a budget and a plan and sticking to them. It often helps to take someone with you on your property search to remind you of the parameters you set in advance, especially when you get blown away by a certain feature of a property and start forgetting all the practical elements you require.
Know How Much You Can Afford to Borrow
Next, unless you’ve saved up enough money to buy a house outright, don’t seriously search for a property until you’re clear about exactly how much you can afford to borrow. Most people need to get a loan to afford a property, so save yourself time, energy and stress by understanding your borrowing capacity early on. This way, you won’t end up looking at a bunch of properties you can’t afford and be tempted to increase your loan to an untenable level.
When determining what you can borrow, keep in mind that this figure shouldn’t be just based on what a bank or other provider will lend you. After all, organizations might be willing to lend you more than you feel you can truly afford. This is particularly so if you know your living costs are going to rise soon, if you’re worried about job security or if you want to save up for other large purchases.
When working out your affordability level, make sure you add in the various expenses involved with buying a home that are external to the purchase price. For example, there are various insurance and maintenance fees plus renovation costs if the home needs work. You should learn how a home warranty works and what it covers, too, as this type of coverage can help you avoid unexpected, costly expenses for things like appliance replacements.
Look into getting approved for a certain loan amount from your preferred lender in advance, too. Then, if properties are going to auction, you can bid on the day and won’t miss out if a good deal is available. Get your paperwork in order before you start applying for loans, so you give yourself the best chance of being approved. You’ll need to have up-to-date tax returns, details of your income, assets and liabilities, and awareness of your current credit standing, too.
Don’t just approach your local or current lender, either. Remember that there are many different options to choose from these days, all with varying terms and conditions. Do your research to find out which will be the best lender and loan type for your specific needs and budget. By being proactive in this way, you can save yourself a lot of money in loan fees and interest rates over the years.
Seek Relevant Advice From Experts
Lastly, don’t sign paperwork without first asking experts for advice. For example, it is always wise to consult with your accountant and lawyer about the contract and its terms as well as the structure of the purchase (ie.g. you may need to put it in a trust’s name or in combined names with your partner or arrange ownership in some other way). Your accountant can also help you with understanding which property expenses you can and can’t claim on your taxes and will help you set things up in the most tax-friendly manner, depending on your current and future needs.
No matter where you want to buy property or what your budget is, by taking the steps listed above, you will ensure yourself the best possible chance of everything going smoothly. Buying a home is a big step, but it is also a wonderful one when you do it with care.