Buying your own home is likely to be the most expensive single dip into your purse that you’ll ever make in your life. It’s imperative, then, to do a huge amount of due diligence prior to purchase if you’re to get the most from your investment. You can’t rush into buying a home, that’s for sure, and there’s far more to be considered than first meets the eye. The different steps are myriad on the journey to buying your own home, including getting bank approval, researching the types of houses that would best suit your needs, considering location, and so much more. Foresight can be a wonderful thing, so to make the process of home ownership more straightforward and simpler to understand, here are 6 financial considerations before buying your IDEAL first home.
YOUR CREDIT SCORE
You may not be fully aware of what your credit score is, but it is one of the most important aspects in getting your bank’s approval when applying for a mortgage that ultimately allows you to buy your first home. A credit score is a numerical expression that is generated through the analysis of a person’s credit history, producing an overall report on their financial state. By having a high credit score, you can be sure to secure the best mortgage deals that the bank has to offer. There are many ways that you can improve your credit score, but it’s important to keep on top of your credit report and try not to apply for any credit for around a year before you apply for a mortgage. Somewhat ironically, it’s also important to note that simply performing a credit check can cause you to lose a few points on your overall credit score.
When you’re considering buying your own home, you should be sure to look at all the different outgoings that you already have, and all the added extras that come with buying a house. It’s essential not to leave anything to chance here; you need to work out how much money you can afford to pay each month, as applying for a mortgage that has repayment amounts higher than you can afford to pay is likely to end up with you being rejected or ending up bankrupt. And nobody wants that. If you want to buy your own home, but aren’t sure that you can afford it, then you may want to consider putting it off for a few years until your finances are more manageable.
Also crucial in the run-up to your first home purchase is to look into the different types of insurance that you’ll need before going ahead and purchasing your own home. This can include home insurance, both building and contents, as well as all the smaller, item-specific stuff, for instance, boiler insurance. By investing in home emergency cover and boiler cover offered by a company like Certi, you can have peace of mind knowing that you’re covered in case of a fault or breakdown, with a 24-hour helpline offered for emergencies which strike at any time. It’s important to factor in all of these separate, sometimes unbudgeted for add ons and extras when calculating your insurance as a whole.
SAVING FOR YOUR DEPOSIT
It’s common practice for you to need at least 5% of the price of your house as a deposit, but you should aim to save up around 15 to 20%, depending on the price of the property and how good your credit rating and history is. You may find that you’re able to utilise the UK government’s Help to Buy scheme, which in some cases can allow you to buy a property that is worth more, even if you don’t have enough of a deposit already saved up. While it will likely take you a few years to save up the money you need for a deposit, by having more money to offer up front, the less money you’ll need to borrow from the bank, and the cheaper your mortgage repayments will be each month. It’s a hugely long game, this, so play it wisely. Once again, don’t forget that there are additional fees that you may not have considered that come with buying your own home, such as a survey and estate agents fees.
DON’T RUSH INTO ANYTHING
We can’t spell this out clearly enough; it’s so important not to rush into any decisions when it comes to buying your own home. Even if you have spent some time applying for a mortgage with the bank and have contacted an estate agent to organise some house viewings, you shouldn’t feel obliged to go ahead with the process should your intuition tell you otherwise. Many people enter the process and then find that it isn’t for them, or that they need a few more years of saving before they are ready to go ahead and be a homeowner. Therefore, be upfront and honest with yourself and others and don’t feel obliged to go ahead if things don’t feel right.
PAY OFF OTHER DEBTS
When you’re mapping out the process of buying your own home, you may want to look at your finances as a whole and work out what other debts you need to consider before making such a huge investment. Your bank may be able to offer you a financial advisor who can give you the necessary information on how to buy your own home, but also give you tips on how to get your finances in order before making those mortgage applications. It’s worth paying off any outstanding debts you may have to your name before considering buying your own home so that you can focus all your money on saving for the big one. The journey to homeownership is far from simple, but by doing your research, you can make it a lot less stressful than it needs to be.