You may have heard before that renting is dead money. Why do people say this? The key reason is that you don’t get any long term benefits from renting. Instead, it only helps you in the short term because the money that you pay goes directly into the landlord’s pockets. As such, you don’t get any close to owning a piece of property.
When you do your own property, you have a lot more financial power. You have capital that you can play with. You can use the equity on your home to make expensive purchases or complete large investments. You will also be able to build towards owning your home so that you have something that you can leave to your dependents or pass on.
Owning a property even makes it easier to retire. If you own your home outright by the time that you retire, you don’t have to worry about mortgage payments or rent bills due when you no longer have a fixed income. This is going to take the financial pressure off you and ensure that you can gain a better quality of life.
Improve Your Credit Rating
The first thing that you need when you want to buy your first home to do is to check your credit score. To buy a house, you are always going to need to borrow a loan. Without a healthy credit score, you’ll always struggle to do this.
Your credit rating is based on your reputation for borrowing and paying back the money. Anyone can check your credit score but it is largely used by lenders to see how much risk you present for them. Your credit score will drop if you have issues paying your bills on time, keeping track of loan payments or if you have ever experienced an issue with debt. Sometimes, people don’t know that there is an issue with their credit score. This makes it more difficult to correct, but certainly not impossible.
You can check your score online through a variety of sources. However, do be aware that certain credit checks will actually cause your score to drop, purely because there you looked at it. The reason for this is that lenders assume if you’re checking it then you have a reason to be concerned.
You can improve your credit rating by borrowing money that you will be able to afford to pay back. You’ll find that there are groups and communities set up that have specifically been set up to help people boost their credit. This is referred to as peer to peer lending. You also need to make sure that you take steps to clear your debt. Start with any unsecured debts that you have such as credit cards and always focus on the ones that are causing interest rates to soar.
Once you have dealt with your credit score, you should think about saving up for your home purchase. It is possible to take out a loan for your home with 3.5% of the total property price. However, this is often a mistake as it will only leave you loans that are difficult to pay back and have high levels of interest.
Instead, you should think about saving as much as possible for a down payment. Ideally, when you buy your first home, you should think about saving as much as 20% of the total value of the house. You might think that this seems like an impossible task. While it can be quite tricky, it often requires you to simply rethink your budgeting. If you make smart cuts in your personal budget, you’ll be able to save a lot over a short period. This is true, regardless of whether you are currently renting. You might also want to swallow your pride and make some larger changes. For instance, you can think about cutting down the meals out each week or month.
You also might want to think about reducing your energy bills. Every little helps here and with the right changes to your energy usage, you could save as much as a few hundred through the year. You can find out more about the downpayment you will need for FHA home loans online by using a calculator. This can provide you with the clear answers you need and tell you exactly how much you’ll need to save in your budget.
Don’t forget, if you are struggling to save then you can think about setting up a side hustle. There are numerous side hustles that could suit your needs. For instance, you can think about starting an online blog. Alternatively, many people make a nice extra cushion of cash through forex trading. It largely depends the amount of time you have available and the skills that you have.
Find The Right Home
Finally, you need to make sure that you are finding the right home to buy. A lot of people do think about choosing a second-hand home as their first property. This can seem like a sensible choice because a home like this is often available at a lower price on the market. However, you do need to be careful here. If you invest in a second-hand home, it’s important to ensure that it doesn’t have too many expensive issues. If it does this is going to drive your costs through the roof after you have purchased it.
Due to this, you might be better off getting a new build. A new build won’t come with any issues as long as you ensure that it is built by a quality contractor. You might even want to think about investing in a home in a planned development. These often provide a smoother buying experience and far less stress. You can also often move in far more quickly as the homes are basically ready to go and you’ll get to live next to people who are similar to you.
We hope this helps you understand some of the key ways that you can prepare to buy your first home. There are lots of steps to take here and they will make buying your new home far easier, rather than the nightmarish stressful situation it can become.