It’s almost a rite of passage for people to purchase a home at some point or another during their working years. Whether it’s a condo, townhouse, or single family home, there is much pride that lot of people take with a home they can claim as their own.
Along those lines, it’s rarely an option for first-time buyers in particular to pay all cash for a home. While I personally think it’s good to avoid unnecessary debt, a mortgage doesn’t really fit into that category. Taking on a home loan is quite often an integral part of the home buying experience. There are a lot of good things that can happen as a result of a home loan, one example being a couple buying a new place when they start a family!
Along with the positives, there should also be other factors to consider when taking on a home loan. These generally involve understand the amount of the loan and even the type of loan that someone would take. Here are a list of 5 things to consider.
Don’t automatically borrow the maximum amount for which you’re approved.
Just because you’re approved to borrow a certain amount, it doesn’t mean that you should borrow that much. Rather, take a look at your overall budget and factor in your overall goals. If you’re trying to put away as much money as you can for retirement or financial freedom, borrowing a lot of money might derail your or at least seriously delay your progress. Borrowing an amount that is much less than what you’re approved can be a great way to allow for solid savings, a balanced approach to finances, and overall flexibility.
Look for a house that meets your needs, but it doesn’t have to be a “dream home”
I think that for many people, there can be an almost romantic aspect to buying a home with their spouse. Particularly when a new arrival is on the way, a couple has visions of that perfect home for the family, that fits their aspirational dreams. While that’s a great thing, and life is certainly meant to be enjoyed, we also need to be careful to make wise decisions. When taking on a loan for a home, remember that you want to buy a home that you like but is also a smart move financially. Both matter!
Select the right loan duration
A longer loan duration might mean lower monthly payments, but it also means that you’ll be on the hook to pay it off for many years. On the other hand, getting a shorter loan duration might provide less flexibility in the budget in case other unexpected things come up with your finances. It’s important to give careful thought to the type of loan product you go with.
Find a competitive interest rate
Interest rates on loans can go up and down. When you look at the calculations, slight variances can result in incrementally different monthly payments. When aggregated over a number of years, these seemingly nominal amounts can add up to a lot of money through the course of the loan. Therefore, it’s important to find the right interest rate at the time you’re buying.
Keep in mind the other home-related expenses
When taking on a mortgage, especially as a first-time home buyer, many people come from renting. Thus, they simply might not think about all of the additional costs that are involved in a mortgage. These additional expenses could include things such as:
- Taxes (often a big expense depending on one’s location)
- Repairs, and even association fees among others. Added together, these costs can be quite significant, yet still brushed off as nothing more than an ancillary concern by some excited first-time buyers. It’s important to carefully account for such fees well ahead of time.
Overall, taking on a home loan from NPBS or another lender can be a step toward purchasing that first home in which exciting, special memories can be made. Keeping in mind factors such as the ones mentioned above can make the whole process a better experience not only in the short-term but in the long-term as well.
Readers, what factors did you keep in mind when buying a home? Or, if not a homeowner, what would you consider when buying your first home?