There are few things that can transform your personal and family finances like becoming a homeowner. Real estate is one of the safest and smartest financial investments you can make, since real estate has gone up in value almost every single year, and often outpaces the S&P 500 and many other forms of investment. But buying a home is a major and very costly financial decision that shouldn’t be taken on lightly. Here are a few tips and tricks to keep in mind to help you prepare your finances to become a homeowner as quickly and risk-free as possible.
Save Up for a Down Payment
The first thing that you need to do to prepare financially to become a homeowner is to save up for your down payment. Your down payment is the amount of money that you pay upfront in cash on the home before your mortgage loan kicks in and you pay those payments monthly for the term of the loan. It is a good idea to put 20% down on a property to ensure that you do not overleverage yourself and borrow more than you can pay back.
Keep a Large Emergency Fund
The next tip that you should use to prepare financially for becoming a homeowner is to keep a large emergency fund. Homes are expensive and they require a lot of maintenance and care. When something goes wrong in your home, you need money on hand to fix those issues without putting yourself in debt. Damage can take place at any time, for any number of reasons. For instance, you might spend up to $12,000 to replace your roof. Make sure your emergency fund is secure enough to pay for emergency repairs.
Build Your Credit
The final tip for you to prepare financially for becoming a homeowner is to build your credit. Your credit score will determine both the size of loan mortgage lenders will be willing to give you and the interest rate on that loan. The higher your credit score, the more you can borrow and the lower your interest rate will be. Maintain a good credit score by paying your credit card bills on time every single month. This is the best way to boost your credit score and make sure that you can buy the house you deserve.
Buying a home is an incredibly exciting time in your life. But it can also be incredibly stressful, as homeownership is a major financial investment. Follow these three pieces of advice to ensure that you are financially prepared for homeownership and can buy your first house with ease.
Check out this article on the financial benefits of owning your own home!