How to Prepare for Your First Mortgage

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How to Prepare for Your First MortgageMaking the switch from renting to owning is a very exciting time. It’s a new chapter in your life, but it can require lots of preparation and work. Here, we’ll talk about what goes into preparing for that first mortgage.

Down payment readiness: The requirements for loans seem to change over time, but one thing is usually a constant — the down payment. It’s important to understand what typical down payment and closing costs will be for the type of property you’re interested in. Many people put down the bare minimum, which is all right if you can afford the monthly payments. This way the bank takes more of the risk than you.

 

Search strategy: There are many decisions that go into the location of your home. Do you have steady work or other daily commitments in the area? How is the commute? Usually, you get what you pay for in terms of location. Many people buy a nicer flat for less money, only to find that their commute is terribly long.

Negotiation readiness: Since most people will not have been involved in a purchase like this before, it’s tough to know where to start. Information is everything. Use the Web to research what other similar properties are going for. Has the property been on the market for a long time or has the price dropped a few times? This would be the sign of a motivated seller. Determine a “walk-away” price. Chances are, you’ll be able to get the property for less than you were willing to walk away for, but if you go in with no strategy at all, you may end up paying more than you had to. Keep in mind that brokers aren’t always working in your best interest, and usually just want to close the deal. You need to look out for yourself and drive decisions.

Rainy day fund: You won’t want to be house-poor right after you move in. Too many people spend all their funds on the purchase and closing costs and then move into an empty flat. Worse yet, when something breaks, you may not have the funds to pay for the repair. This is an instance where a payday loan could come in handy. However, with some rainy day funds, you should have many options for furnishing, saving, planning repairs and more, and if something goes wrong, you’ll have the funds you need on hand.

 

All month long we’re revealing our top money-saving ideas for the home. Learn them all here!

 

The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.

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Darwin is an engineer and MBA who takes an "evolutionary" approach to finance, writing about adapting to evolving financial management, tax, investing and savings opportunities. Making more money and saving more money is an adaptive process — join the evolution! He blogs at Darwin's Money www.darwinsmoney.com and ETF Base www.etfbase.com

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