Buying your dream home is not a decision that gets made overnight. In fact, it could take as long as a year to make the decision to take the leap. From an emotional point of view, preparing to purchase can be extremely taxing, but your main focus should be on your finances. Before you take a leap and offer to purchase real estate, you need to understand what is required of you and where to start.
Here are a few tips for planning for your dream home:
- Set a clear budget
Setting a budget is the first step to buying a home. Most of the time, you can’t afford what you think you can. And without the help of a real estate agent or a financial provider, you might be setting unrealistic goals about your future. When you have a moment, schedule an appointment with someone who can review your finances and give you a better understanding of what you can expect. Once you have a better idea of what price range you should be looking at, you’ll be able to start the house hunt with confidence.
- Check your credit rating
Your ability to be approved for a loan is dependent on your credit rating. Do not start browsing homes or offer to purchase a property until you have checked your credit score and you feel confident in your financial status. Once you have a good credit score, the financial provider with whom you seek help from will determine whether or not you are creditworthy. Depending on the outcome, it will dictate the rates you’ll be required to pay on your home. The higher your credit score is, the lower your interest rate will be.
- Figure out what your down payment will be
Before and during the time when you decide to purchase a house, you will need to save. Saving a lump sum for your down payment will reduce your bond repayments and ease up some finances for your future. A good rule of thumb is to try and accumulate as much as you can for your down payment, as this will become an ongoing expense that you will be required to pay for years and years to come. And, on that note, consider putting together an emergency fund too. You never know what could go wrong, so in the event of an emergency, it would be ideal not to have to delve into your deposit savings to assist.
- Shop around and avoid major purchases
When looking for your dream home, shop around for a broker and do not settle on the first company that is willing to offer you a big enough loan. The reason for this is so that you have a variety of options where you are able to map out the financial risk of each. Look at the different interest rates that companies are offering and compare fees. On the back of this, make sure that you tighten your budget over the months leading to your purchase. Your chosen bank or financial company which will be assisting you with your loan will be able to recall these purchases, and if any of them are made on credit, it will look bad on your name.
- Make a house wish list
Everyone has a dream home and, unfortunately, not everyone can afford theirs because of financial reasons. When you decide to purchase a home, try and put together a wish list of the elements you need and the elements that you want. Once you have a clear idea, you can be realistic about your hunting process and even compromise on certain things. For example, if you’re a newly-wed couple living alone, without children, do you need to have a house with three bedrooms? Or do you need to have a home that is in walking distance from the beach? These are simple examples of scenarios which will help you determine the difference between your needs and wants. In a perfect world, you would be able to have everything you want, but cutting out certain things will give you a clear idea of what you can afford.
- View every home in person
Viewing an online listing is very different from seeing it with your own eyes. Often times, the photos you see online might spark an urgency to apply immediately, even though the home looks nothing like the photos. These situations can often result in real estate scams, so keep your eyes peeled for bargain listings, but do not make an offer to purchase real estate simply based on a photo. Visit the home in person and take a look at the neighbourhood. You are not just paying for the property, you’re paying for the area too. And buying into a neighbourhood which is affordable but ridden with crime could be a costly investment.
Preparing for your dream home takes months of planning and financial preparation. Once you have spoken to an agent and been accepted for a loan, take a more serious look at an offer to purchase form. Property is a long-term investment and, depending on your down payment, it might have you committed for years to come. Choose wisely and make a decision based on your future.