Now that you've been at your job a few years and have steady income, you may be thinking of buying your first house. Investing in real estate could be a good way to grow your money, but you'll want to make sure you're ready for the financial responsibility first. Here are some aspects of your finances that you'll want to have in order when you're ready to start house hunting.
A Savings Account
Even though you might obtain a special mortgage for first-time home buyers that doesn't require a huge down payment, you'll still want plenty of money in your savings account for unexpected expenses associated with buying and owning a house. For example, consider your home improvement and lawn maintenance skills. If you can't keep up with weekly yard work and home maintenance, then you'll need to hire someone to do the work for you, and that adds to the cost of owning a home.
Plus, you'll need emergency funds to cover things like an air conditioner breakdown or refrigerator failure. Having money for these emergencies keeps you from going further in debt and ensures your home gets the repairs it needs to hold on to its value.
A Secure Job
You can't guarantee your job security, but it's good to have a job you can count on or at least have skills that allow you to get a job in your area if you lose your current job unexpectedly. You'll need a steady history of employment to qualify for a mortgage, and then you'll want steady work so you can pay for your home and enjoy financial security.
You might get a home loan with poor credit, but the terms won't be as good as a loan you get with good credit. When you have good credit, you can qualify for a larger loan since the interest rate will be lower. You'll also have more options in mortgages when your credit is good. If you have problem credit or no credit now, then work on building a good credit history so you'll qualify for a mortgage and get a good interest rate and a lower down payment requirement.
A Realistic Budget
One of the difficult parts of finding a home you like is getting the perfect home that matches your budget. Setting the maximum amount you're willing to pay is important so you don't end up with a mortgage payment you struggle to make. Remember that you can't compare the cost of a house payment with the cost of rent since you don't have to pay for repairs, taxes, and maintenance when you rent. Work through your budget carefully to decide how much home you can afford and then let your real estate agent know your limit so you don't tour homes out of your range.
When you're on a tight budget, you may need to wait for the perfect home to come on the market, but the wait will be worthwhile when you finally own your own home and you can afford it easily.