Thirty-six percent of Skimm'rs are currently saving up for a house. Yay them. For the rest of us, making it a reality can be intimidating, especially if you're just at the starting line. Here's what to know if you’d like to add ‘homeowner’ to your list of life goals.
A little thing called equity (aka your net-net-net worth). A home can be a long-term wealth builder if you’re ready for it. Every mortgage payment you make builds you more and more equity. As in, how much of the property you actually own. If your home is worth $250,000 and your mortgage balance is $150,000, you have $100,000 of equity. So your equity goes up as your loan goes down — something that could help you pocket more money when it’s time to sell. Cha-ching.
Not so fast. Buying a home is a mega-investment. Even if you’re not ready to pull the trigger yet, here are the boxes you should think about as you’re making your timeline…
FHA loans are backed by the federal government and they may let you put as little as 3.5% down. Your credit isn’t as big of a factor, either. The catch is that you’ll have to pay for mandatory mortgage insurance, so they cost more than conventional loans.
VA loans are exclusive to veterans and active duty service members. They typically don’t require any down payment or mortgage insurance.
USDA loans are around for homebuyers looking to live in certain rural or suburban areas. (Sorry, big cities are out.) The upside is that you won’t need a down payment.
First, you’ll want to be preapproved for a mortgage. Lenders take a quick look at your finances, then fork over a letter saying you've been preapproved to borrow up to a certain amount.
A preapproval letter tells sellers you're a serious buyer who's ready to get the deal done. It also sharpens your budget so that you aren't wasting time looking at houses you can't afford. To get the best deal, get preapproved with multiple lenders and compare offers before going with the best one.
You should also open up your laptop. Or link up with a real estate agent to research your ideal neighborhoods. Look into small things (like whether you’re on an emergency vehicle route - hiii, sirens) as closely as the big things (property value trends or nearby schools).
Okay, you’re ready to start hitting up open houses. Just don’t get too attached until your inspection gives you the green light. Do your best Nancy Drew impression and be on the lookout for things like foundation issues, water damage, and mold. When you come across a home you’re in love with, put in a bid. Then flex your negotiation muscles before settling on a final price.
Mazel. The closing marks the end of the home-buying journey. You'll wrap up any outstanding fees with your lender and sign the final papers to be bound in homey matrimony.
You’re not going to spend what you have left on decor, we hope. Now that you're nesting, keep up the good financial habits that got you there. Topping the list is boosting your life insurance and home insurance coverage. If the unthinkable happens to you or your partner, you want to make sure your loved ones can comfortably afford to keep the home.
Buying a home is a big deal. So is planning for it. But you don’t have to go it alone. John Hancock can help you get on the right track with expert advice, a plan, and tips from the pros to help get you financially ready to buy that welcome mat you've always wanted. House, warmed.
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