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Before any aspiring St. Louis homebuyer can truly call a home their own, many aspects of the home-buying process need to be considered. Navigating this process can be difficult, but certain steps can be taken to make it more manageable for anyone looking to purchase a new home. Below, we’ve provided you with some useful personal finance tips to help get you started:
What’s your budget?
Before you figure out anything else, you need to find out what your budget is. You’re not going to be able to consider buying that dream property until you know for sure what you can afford. Sit down and work out your monthly income and then your household expenses (also called outgoings). These are important factors when working out what you’ll be able to put aside each month.
You should make note to include your future mortgage repayments, any utility costs, and Realtor fees – Realtors will often charge you a fee based on the price of the property. These fees vary, but can be as high as 6%. Consider homeowner’s association fees and maintenance or repairs also, as these are often unexpected expenses.
Get your everyday outgoings in check
More often than not, we find ourselves with various direct debits such as entertainment subscriptions, gym memberships, cellphone contracts, and even more. Are all these essential while you’re saving? Some will be, but while you’re saving up for a home, try and eliminate one or two of these and the savings will start adding up quicker than you think. Also, once you get closer to what you want to save or even after you purchase your new home, you can start reintroducing these services.
Keep track of your credit score
Check your credit score and see where it’s at before you start saving. If you can, attempt to improve it or at least make it look as presentable as possible. You’ll have more chance of being approved for a loan if your credit score is good. Moreover, work out how much you have or can save for a down payment. Homebuyers generally pay between 5-20% of the price of a property as a down payment, but the higher your credit score is, generally the lower this percentage will be.
The down payment
After you have an idea of what kind of property suits you, you’ll need to think about the down payment. It goes without saying that the more expensive the home is, the more you’ll need to save for your down payment.
If your budget is tight, then you might need to opt for a bigger down payment in order to qualify for a mortgage and be able to buy the home of your dreams. The general rule of thumb is to try and keep your total housing cost below 30% of your gross income.
Buying a new home can be an in-depth process, often leaving homebuyers reeling from all the steps they have to take. Hopefully these tips give you some more ideas on how to save up for that dream home of yours and take the next steps as soon as possible.
If you’d like to get pre-approved for a mortgage, or if you need some recommendations for experienced, local Realtors, please reach out to us. We’re always happy to help.