Over the course of the past decade the housing markets throughout the world have been, well…quite volatile, to say the least. In turn, this has confused, upset or otherwise made it very difficult for a lot of average people to begin taking steps toward home ownership. For most, enormous bank loans are the way to go – of course this also means loads of additional monies that will need to be paid in interest, not to mention the threat of a bank foreclosure in the event that some mortgage payment is missed or late. Given this, the next logical thing to do is to save up for that new home instead of automatically going into massive debt. Naturally, this too carries with it some very noteworthy considerations. If this is the path you’ve chosen, here are some things you need to do…
Concentrate on homes which are actually in your price range
One of the biggest mistakes that most prospective home owners make is in overestimating their price range. It’s very easy to get stars in your eyes and fall in love with that amazing place you saw, but at the end of the day you have to be realistic. Do you really want to commit yourself to additional decades of debt, is it worth the sacrifice? Moreover, you have to think about things from a long-term perspective. If analysts predict a drop in property values for the area in which you’re buying, having a long-term mortgage with a fixed rate might mean that you end up losing lots of your hard-earned money when / if you ever decide to sell your property.
Get pre-approved / pre-qualified
Arguably, the first step to take is pre-approval and pre-qualified. This allows you to both identify places in your price range as well as evaluate all aspects of your income and credit history. Sure, you can make due without taking this step, but it actually helps to remove barriers in the long-run and can even to prevent certain logistical complexities from arising as well.
Carefully evaluate the pros and cons of a “points” vs. “rates” mortgage
Your goals here are to own a home while paying as little as possible in the process, right? Well, there are very important things to consider when it comes time to choose a mortgage type. Specifically, you should be thinking about whether or not you’re going to go for a lower interest rate in exchange for a higher closing cost. For most people, the prospect of a lower interest rate is very attractive, for obvious reasons. Looking back on specific case studies, it’s often found that people end up paying much more in interest than they expected, so having a way to alleviate this expenditure is vital, in a sense. You should be well-versed with all the intricacies of this situation while you’re still saving.
Do as much “homework” as possible
Not only should you have a number of properties in mind while working up toward that down payment, but you need to consider various outside factors as well. Access to good schools, home inspection reports, long-term analysis of property value drops / spikes, national home loan rates, etc. There are lots of things to consider, so in your spare time while you’re still saving, take in as much information as possible.