While owning a house might give you the luxury of being a homeowner, the process of buying a new house is never easy. From saving up for a downpayment to getting pre-approved by the bank, from finding the right house for you and your family to finding the right real estate agent, there is so much involved when it comes to buying a new home. Whether you’re talking to real estate agents in Bromley or you’re looking at properties online, there is one thing that you need to do yourself – manage your finances! And, we all know, buying a new property involves a huge amount of money; after all, it is a long-term investment. Here are the three primary financial requirements that you must check before buying a new house in 2020.
Work On Your Credit Score
You need to start working on your credit score at least 8 to 12 months before you even think of buying a new house. Most banks look at your credit score before pre-approving your mortgage – the better your credit score, the better your chances of getting the pre-approval. In fact, if your credit score is not too great, many banks can flat out refuse to give you a loan or they could charge very high rates of interest on your mortgage amount. In order to improve your credit score, you need to make sure that you have no pending debts, you need to pay all your bills on time, make sure you have no late payments and clear all your past bills. By doing so, you can fix your credit score within months. Be sure to check your credit score with your bank or credit card company before you start the process of applying for a pre-approval. The sooner you start working on your credit score, the better it is for you.
Get Pre-approved For Your Mortgage
Basically, a mortgage pre-approval is an agreement between the lender and the customer that the lender will loan a certain amount to the potential buyer once he or she has found a property. In order to approve your pre-approval request, lenders usually look at 3 main things – affordability, income and credit history. However, a pre-approval does not necessarily mean that the lender will give the loan. In order to secure the loan, the customer must pass the Agreement in Principle stage. There are two reasons that the Agreement in Principle is important – one, this means that you have passed the credit checks and you will get the finalized mortgage amount, and two, this also allows you to know your budget and stick to it. The best time to get your mortgage approved is around 2 to 3 months before you close the deal.
Save Up For All The Future Costs
Buying a new home is no easy ordeal. Other than the downpayment, there are quite a few more costs that are involved in the process of buying real estate. First, you will need to pay a fixed fee to your real estate agent. Next, you need to put in the cost of stamp duty. Then comes the cost of the booking fee as well as the conveyancing fee. Don’t forget to account for the charges of the house inspector as well as the property valuator. Then, you need to pay the land registry too. Of course, the property requires any cleaning or fixing, then you need to pay for that too. Plus, you need to account for the cost of moving. Let’s not forget the most important cost – the monthly mortgage and rate of interest that you need to pay to the bank. Then you have to account for monthly household utility bills too. Make sure you have all your fiancés in order, and some money for a rainy day, so that you don’t burn a hole in your pocket during the process of buying your new home.
One of the most important things to keep in mind while you are looking at potential properties is your budget. You can tick off everything on your financial checklist, but if you decide to fall in love with a property that is beyond your means, you will end up in a financial turmoil. With monthly mortgage payments and high rates of interest, you might end up dipping into your savings to actually pay off your mortgage. You need to figure out how much you can afford to spend, now and in the long-term. Just because you might qualify for a higher mortgage value does not mean that you need to buy a higher-priced house. Before you start the house-hunting process, it is important to prepare your fiancés and understand exactly how much you can afford to set aside as the downpayment and how much you can pay every month without leaving a hole in your pocket.