Buying a new house is no easy task, especially when you consider the long-term financial commitment! In order to buy a new home, your financial planni
Buying a new house is no easy task, especially when you consider the long-term financial commitment! In order to buy a new home, your financial planning needs to be immaculate. You need to ensure that you have enough money for a downpayment, you need to set aside some money every month to pay the mortgage off, and you need to have cash in hand for those hidden costs and unexpected expenses. While estate agents in Telford can help you find the perfect home and a good moving and packing company can help you shift base, you have to figure out your finances by yourself. So, here are the three primary financial things to check before you buy a new home in 2021!
How much can you afford?
Affordability is the first and most important thing you need to consider before you even start looking at properties. How much money can you afford to spend on your new home? How much money can you put aside every month while maintaining your day to day expenses? Let’s not forget about fixed expenses such as utility bills, travel expenses, car loans and student loans. Keeping all this in mind, you need to figure out how much money you can spend on buying your new home without getting tied up in debt. Yes, your new home is an investment, but that doesn’t mean that you spend every penny you have to buy this property. At the end of the day, you need to have some money for a rainy day! In short, you need to buy a house that you can afford today. Not tomorrow, not ten years down the line, but a house you can afford today based on your disposable income.
Do you have enough for a downpayment?
Once you sign the deal, you need to give the seller a downpayment for the property that you are buying. Usually, this downpayment is around 20 per cent of the total cost of the property. Let’s assume you’re buying a new property for £200,000. In that case, you need to pay a downpayment of £40,000 straight away. To ensure that you have enough money for a downpayment, you need to start saving at least a few months in advance. The best-case scenario is that you start putting aside every month for at least a year so that you have enough money to pay the downpayment without burning a hole in your pocket. After all, who has £40,000 just lying around to pay to the seller? This is where your budget matters. If you decide on a budget beforehand, it will be straightforward for you to start saving money every month, which you can put aside for the downpayment.
What’s your credit score?
It’s a pretty simple formula. The better your credit score, the better your chances of getting a mortgage. If your credit score is perfect, you’ll get a mortgage at a low rate of interest. However, if you don’t start working on your credit score before applying for a mortgage, the chances of your mortgage request getting denied are pretty high. And, if it does get accepted, you’ll have to pay a pretty hefty rate of interest. You need to start working on your credit score at least 8 to 12 months before applying for a mortgage. Pay off all your credit card bills, make sure you have no pending utility bills and try to clear your debt as much as possible. The sooner you get started on improving your credit score, the better!