4 things to do before buying your first home

Ginger Dean

June 16, 2014

By: Ginger Dean, Home Finance Specialist

In: Finance and Legal

Buying your first home is a big investment. Really that's just a polite way of saying that buying a home is expensive. There are a lot of costs associated with the purchase, so before you sign on the dotted line it's important to make sure that buying a home makes financial sense.

Use this checklist to find out:

Always get your home inspected. A home inspection helps determine if the home is in good condition. A home may seem like a deal good because the purchase price is low and it looks pleasing from the outside. An inspection helps send up red flags for all the things the eye can't see.

You definitely don't want to buy a home, move in, and then find out it has termites, water damage, or cracks in the foundation. These types of repairs can cost thousands of dollars and make you regret buying a house in the first place.

Shop around for the best interest rate. A mortgage is possibly the biggest debt you'll ever have. You want to make sure you're getting the best interest rate possible. Inquire with at least three different banks so you have a good sense of what's out there and what the best rate you can get really is.

You can also look at different types of mortgage options such as fixed interest rates or variable interest rates. If you want to pay off your mortgage as soon as possible don't forget to ask about any prepayment penalties.

Get a credit check. Before you visit your bank, order your credit record to see where you stand financially. Obtaining your credit score will also give you some idea of how much of a mortgage loan you will be approved for as well as what interest rate you will get.

Many banks have online mortgage calculators that can help you predetermine your financial situation before you even visit your bank.

Set up a mortgage reserve fund. What would you do if you bought your first home, moved in, started making mortgage payments, and then lost your job? If you default on your mortgage payments because you aren't prepared for a financial emergency you could potentially be in danger of losing your home.

This is why it's a good idea to have a mortgage reserve fund. It helps protect you in case of an unforeseen event as well as cover the costs of extra expenses that come with buying a home.

Some people buy their first home because they want a place to call their own and some people buy a home as an investment. Regardless of the reason it's important to take precautions to make sure that you are financially ready for this big step.

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