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Are you thinking about purchasing your first home? This is a big step. In fact, many would argue that this is the most significant investment that you will ever make in your adult life. It beats the car or the pension pot that you will eventually explore for your twilight years. While you might feel as though you are ready to purchase a home, you shouldn’t rush this decision. There’s a lot that you should keep in mind and consider before committing to this possibility. You need to approach this decision from a financial perspective as well as keeping your lifestyle in mind. Buying a home won’t make sense for everyone and it does depend on your current situation.
In this guide, we’ll discuss everything that you need to consider when you are buying your first home. That way, you can ensure that this is going to be the right choice for you.
Are You Financially Ready?
First, you should think about whether you are financially ready to purchase your first home. You need to look at possibilities such as your credit rating. You need a healthy credit rating to buy your first home. If you don’t have this, then you will be significantly limited on your choice of mortgages. We recommend thinking about checking your credit rating and then taking steps to boost it up.
You can boost your rating in a few different ways. Arguably the best way is to borrow loans that you know you will be able to afford to pay back. This shows lenders that you can be trusted. You won’t have to worry about them ignoring you because the risk of lending you money is too great. There’s no set rule on the creditng rating you need and individual lenders do tend to have their own rules that they follow here.
Another option to consider would be the deposit. You should think about saving as much as 20% of the total cost of the home for the deposit on the property. 20% will ensure that you have access to a range of different mortgages. If you are worried that your options are limited here, you can also speak to a mortgage broker. They can help you explore possibilities that might be hidden from the typical buyer.
Then, you should think about all the additional costs that come with purchasing a home. It doesn’t just stop with the mortgage payments and the deposit. There are other possibilities to keep in mind here as well including the legal costs of buying your first home and ensuring that everything is handled the right way.
Does It Fit Your Lifestyle?
Next, you need to think about whether a home purchase fits well with your lifestyle. Purchasing a home makes sense if you are getting ready to start a family and settle down. It will deliver the right level of stability that you are searching for here. However, it might not be the best idea if you haven’t found where you want to live or you’re not ready to settle in one place.
In cases like this, renting can give you the greater level of flexibility you need. Particularly, if you want to be able to move without any delays. This can also be useful if you don’t have a lot of job stability. For instance, you could be freelancing. Freelancing will find it more difficult to get approval for a mortgage regardless of how much they earn. Though it is worth pointing out that it’s far from impossible to gain approval if you are freelancing.
You can also get an easier ride if you are renting. You might hate the idea of taking time to maintain a home or it’s possible that you just don’t have the time. Regardless, if you rent, then you’ll likely find that a landlord is going to handle a lot of the responsibilities that a homeowner will take on board.
This can save you time and even money if the worst happens. It’s possible that your home is damaged due to a natural disaster. If this is the case, then you will need to handle everything including the restoration process. This can be partially covered by your insurance but claiming on it completely will cause your premium to rise. If you rent, you’ll likely only need to cover the cost for a personal property restoration company which will be far more budget friendly.
Are You Ready For the Work?
If you are approaching a home as an investment, you can’t just leave it to stagnate. Instead, you should think about making changes to it regularly. If you don’t do this, then when it’s time to sell, it’s not going to reach the value that you hoped for on the market.
You need to put the work in to ensure that your home remains modern and fits with the latest trends on the market today. There are lots of examples that you should keep in mind here. Pay particular attention to the kitchen and the bathrooms. These are the rooms that are always going to matter the most to buyers. The right changes here could add as much as 25% onto the final sale price of your home on the market.
There’s other work that needs to be completed on your home to ensure it retains the right level of value as well. For instance, you should think about improving the curb appeal. Boosting the curb appeal will enhance the perception that buyers have when they see your home for the first time. This is going to encourage them to make greater offers on your property.
Is It The Right Time?
You might also want to consider whether it’s the right time to buy a property? This isn’t just about whether it’s the right time to buy a home for you. It’s also about whether the market is in the right position. You should think about the cost of homes in your area and explore if they are selling at the right price. It’s important to make sure that you don’t buy a home for more than it’s going to be worth when it’s time to sell a few years down the line. If you do this, then there’s a strong possibility that you will end up with a mortgage shortfall. This can be catastrophic for your finances because you could ultimately be forced to sell the property at a loss.
Is Renting Really Dead Money?
Finally, you might have heard about how renting is dead money. While this is true, to an extent, it’s worth noting that this doesn’t tell the full story. Ultimately, buying a home can cost you more because the mortgage payments can be difficult to deal with. That’s why you need to make sure that you can afford the cost of a property before you commit to a purchase. If you can’t or you’re not certain, it could be far better for you in the long term to continue renting, at least for now.
We hope this helps you understand everything that you do need to consider and keep in mind when you are purchasing your home. If you explore the right options, then you’ll be able to make sure that this makes sense for you financially while also fitting well with your chosen lifestyle.
Remember, your first home doesn’t need to be somewhere that you plan to live in the long term. It can be smaller and then you can buy a larger property at a later stage in your life.
Renting is still dead money, even if the mortgage costs more in the short term. Twenty years later, you’ll be glad you bought, even if it means making some sacrifices at first.