Home prices are about as low as they’ve ever been. Mortgage lenders and realtors are making it clear that this is a great time to set up a mortgage and buy a new home, but how do you know if you are ready to commit to a mortgage that is going to take a great big whack out of your income and is such a long-term commitment?
There are a number of factors that you need to consider before you commit yourself to your first home mortgage:
It’s pretty obvious that if you’re going to commit to a long-term mortgage, you will need to be able to afford the monthly payments, not just now but for the long-term future. Part of the reason for the recent economic problems was that too many homebuyers were urged to spend more than they could afford on getting a home that was just too expensive. Your income needs to be consistent and hopefully on an upwards trend. This relies upon you having a steady job that has some kind of security. Of course, no job is ever totally secure, but you need consistent income that will not fluctuate over different times of the year. If you work in a job or earn your own money that is seasonal in nature then of course you will be able to afford a mortgage but you will need to pay special attention to your budget.
- Do you have a lump sum of cash available to kick-start your first home?
There are other costs associated with buying your first home that need to be taken into account. Outside of your initial monthly mortgage payments you will need to have money available for the other essentials of home buying which include legal deed and transfer costs – these can run into many thousands of dollars. If you’re not sure that you are going to be sticking around a particular area for a number of years then you might want to reconsider buying a home at this stage. There are all the other associated costs on top of your new first home mortgage such as the cost of furnishings and fitting out the home the way you want it. At least this is something that you can do at your own pace and need not necessarily require massive funding initially.
Many new homes, despite first appearances, require a large amount of work to them to make them as comfortable and as habitable as you’d like. This could just be cosmetic problems that are easily fixed, but often problems with plumbing, leaks, damp and other more serious issues can come to light. You will need to be able to deal with these problems by yourself, or perhaps you know somebody that could help out. If neither of these options are available to you, you might end up paying a lot of cash to get these things repaired.
As worrying as some of these additional cash requirements might sound, there are great advantages to owning your own home that outweigh many of the initial seeming downsides. You are no longer paying monthly money to a landlord (you might as well throw the cash down a well!). You are paying to ensure you own family’s comfort and security. You are giving yourself a huge credit-rating boost for future need of loans or credit, and you are building up a physical asset made in brick and mortar.
Just remember to take into careful consideration some of the above points and research thoroughly what you are getting into whan you look for mortgage financing.
You can read another article with tips about how to find the lowest mortgage interest rates here.
