Young and footloose? Be smart in your youth and invest from an early age. Buying a house is no longer about putting down roots, but a smarter option than paying rent since the investment will pay rich dividends in a few years rather than simply drain your wallet.
It's exciting to buy your first home. However, navigating the financial aspects can be like climbing Mount Everest in flip-flops. Fear not. With this guide, you will learn how to manage your money and be confident in conquering your dream home.
Determine your budget: The most important step in the efficient management of your finances is to establish a realistic budget. Using loan calculators, you can determine the amount of your EMI (equated monthly instalment) payment each month based on a variety of loan amounts, interest rates and repayment schedules.
Get a pre-approved loan: Look for a loan pre-approval once you've chosen the loan provider. Your position as a serious buyer and the clear understanding of your budget when negotiating with the seller is strengthened with a pre-approved loan in hand. Based on your income, credit rating and other financial factors, also helps to determine the amount of the loan you are eligible for.
Save like a superhero: Building a solid deposit, usually 20% of the house's value, is the initial step. This reduces the amount you borrow and saves you money on private mortgage insurance (PMI).
Track your expenses: Use budgeting apps or a simple spreadsheet to understand where your money goes. Identify areas to cut back because every little bit is a victory!
Learn to say “No”: Imagine saying "no" as your superpower to impulse purchases. By sticking to your needs, you'll maximise your savings and move ahead to owning your space.
Explore high-yield savings accounts: Saving accounts can be your treasure chests. They offer higher interest rates than traditional accounts, making your funds work for you.
Remember, buying a house involves more than just the purchase price. Here are the additional costs you need to be aware of:
Closing costs: Think of it like an entry fee to your new castle. It includes origination fees, title insurance, and property taxes – expect them to be around 2-5% of the purchase price. Check with your real estate agent for a comprehensive list of additional costs you need to be ready for.
Homeownership expenses: These are the ongoing upkeep costs of your home. Your budget must take account of your property taxes, homeowner's insurance and potential HomeOwners Association fees.
Unexpected repairs: Every house needs TLC, so set aside an emergency fund for unforeseen repairs and maintenance, ready to tackle any leaks or breakdowns.
A good credit score will make it easier to borrow with low interest rates and you'll save money for a longer time. You can keep your credit score shining with the following steps:
Paying your bills on time: Late payments can be like a dragon burning up your credit report. To prevent missed deadlines, create automatic payments and reminders.
Keep your credit utilisation rate low: This is the percentage of your credit limit that you use. For a healthy score, aim to keep it below 30%, think of it as using only a small portion of your magic credit sword's power.
Krishe Pearl
Krishe Avya