Questions To Ask Yourself While Buying Your First House

Posted by David Creighton on February 18th, 2021

Buying your first house is both emotional and intimidating, a plethora of thoughts walk through our heads while planning to buy a house. First time home buyers should understand it is possible to own your first house even if you don’t have the entire amount in your savings. Yes, you will encounter innumerable new terminologies such as a fixed-rate mortgage, down payment, closing cost, and credit ratings but you need to keep in your mind your first home is possible.

Apart from space and shelter a home also provides you with tax benefits, it opens a window for reinvestment and can also offer you a long-term investment gain. Now the most striking question, you may have is “how to get started?” There are several ways to finance your first home and some of them offer fabulous interest. But before you need to ask yourself few questions.

Should I worry about my financial health?

Before switching the tab and searching for your dream home, you need to ask yourself, is investing in your first home the right decision. It’s not just about buying a house, you spend on maintenance, décor, and several other customizations after you buy a house. Chalk a plan and look at few things before concluding if you want a house.

Take a look at your saving: 

Look at your savings and ask yourself is this my emergency fund or can I do without it. Don’t even think about spending an emergency fund, which may help you last six to nine months.

Review your expenditure: 

You need to check your monthly spendings and calculate the money you can allocate to the mortgage. Make a monthly budget allocating the money to necessities, maintenance, debt, clothing, food, entertainment, retirement fund, and miscellaneous items.

Does your Credit Rating permit a mortgage for your home at this point? 

Look at the historical data of paying bills to calculate the DTI ratio (debt-to-income). Lenders restrict the preferred limit to around 30% nowadays. These figures may vary depending on the state of the real estate market. 30% of the borrowers' monthly gross income, though this figure can vary widely depending on the local real estate market.

Can I get a pre-approval for the loan? 

A pre-approval for a mortgage is a must if you want to buy a house. The loan officer looks at several things, including your credit score and credit report to approve your loan. They will also look at your tax returns, payslips, bank statements, and current debt.

You may come across lenders that offering fancy deals but looking at the things mentioned above is extremely vital. You cannot risk the biggest investment of your life to crash in an economic slowdown. You cannot rely on the sale of the property as your retirement fund, make a conscious and safe decision while investing in your first house. You can take help from professionals and consult if your financial health stands a good chance in helping you buy a house or not.