Home buying is one of the biggest financial investments most people make during their lifetime. The majority of homebuyers invest their entire life savings to ensure they can have a home in their retirement life. Buying a house comes with an enormous amount of financial responsibility, especially for young people who are not used to making costly purchases. Given the increase in land and house prices, millennials and first-time homebuyers will have an incredibly difficult time buying their first house.
Today, the task of buying a house requires a certain level of financial discipline that can be honed by practising stable financial decision making over time. Below is a collection of tips and habits that can help you buy your first house early in your life.
Consider Where You Want to Live
Location is a primary factor in determining the affordability of a house. The choice of city is an important factor which you shouldn’t rush with while deciding where to live considering all other urban amenities. Another important factor in determining affordability is what stage of your career you are in. Many people who are in their twenties and thirties, are still trying to figure out their career options or trying to find their business niche. Home buying experts advise young homebuyers to give serious thought to the city where they will buy their house. It should be a place where the residents can find their workplace and personal comfort.
Therefore, if you want to know whether a house or apartment is the right choice for your current and future needs, try asking the following questions before thinking about buying a house,
- Do I want to live in an urban or rural neighbourhood?
- Would I be okay with neighbours in my building, or do I want a standalone house?
- Do I care how long my commute is?
- Do I want to drive, ride the train, or walk to my normal destinations?
Market Research to Check Affordability
Market research is important to explore all affordable home buying options. Home search websites are great tools to help a potential home buyer in getting a closer look at the market. Market research will provide a perspective on the type of properties for sale and what sellers seek. Doing the due research will allow you to gain an understanding of how much an average home can cost, what one can afford, and how much one needs to save for its down payment.
In case the houses in the desired location or neighbourhood are out of the pocket range, one can save more money or invest in saving schemes. You can even downsize the type of home or search for a neighbourhood in another locality, but with more affordable prices.
Keep Your Spending Habits in Check
The type of spending habits and the level of financial discipline one exercises can make or break your ability to buy a house in the long run. Young people are often found to be impulsive buyers; therefore, they usually end up with loans and a dented credit rating. If you have been falling behind on your credit card payment, you have borrowed money from friends and family and have been unable to return it, you will have a challenging time finding the financial discipline for buying a house. It is important to learn financial responsibility at a young age as the lack of financial discipline will haunt you in later life. For improved financial management, check your bank account and credit report early, so that you have sufficient time to correct any issue. Banks lend mortgage loans and house financing assistance to people who have a clean and error-free credit report. Such financial credibility makes you look financially authentic and trustworthy. As a result, creditors or lending agencies will trust you with a loan.
Start Saving for a Down Payment
A down payment is a percentage of your home’s buying price. Down payment is paid upfront when a home loan is closed. The down payment amount is also the first financial investment you make in a potential house. It can range from 3.5 to 20% of the total cost of the home and the amount depends on the credit score, mortgage interest rate and current financial situation. Real estate experts advise homebuyers to consider a down payment of 20% of the property price as it will allow you a bigger stake in the property right away. It is crucial to pay more upfront as it allows you to lower your monthly payments in the future and maintain a financial buffer.
However, the down payment is not the only payment you will be making during home buying. It is an entire process that you need to be able to afford. By using a mortgage calculator one can determine how much home you can afford based on the monthly payments you’re able to make.
Divide the Monthly Income into Three Sections
In Pakistan, the majority of home buyers are salaried class individuals. Besides the small class of rich and elite investors, first-time homebuyers need to save up a considerable amount of their monthly income to be able to afford a house. Saving money is a prerequisite to afford anything of substantial value. For salaried class individual home buyers, one should follow the 50/30/20 rule of budgeting. One should spend 50% of their salary on their actual needs, 30% on the things you want, and 20% goes on saving. This 20% can also mean investing in or saving up for the house. If you stick religiously to this bifurcation, buying your first house will become much easier.
The process of buying a house requires a certain level of financial discipline. Most first-time home buyers find it difficult to make the initial payments for their first house. Real estate experts advise that there is certain market-level research that needs to be done by potential home buyers before they can make the decision of buying a house. Home location is one of the biggest factors in determining affordability and the buying decision. It is advised that potential homebuyers do their research well in this area before making any decision. This is followed by financial discipline and a check on spending habits in the long run so that home buyers are able to afford a house. It becomes incredibly easy to save and invest if potential home buyers are in the habit of doing so. Lastly, salaried class individuals that make up the majority of the middle-income class home buyers, need to use effective saving strategies to become financially capable of buying their first house.
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