Top 5 Key Factors to Consider When Buying your First Home

1. Financial readiness- financial readiness is a crucial aspect to consider when embarking on the journey of homeownership. It involves evaluating your current financial situation and making sure you are adequately prepared to handle the financial responsibilities that come with buying a house. This process typically includes assessing various factors such as saving for a down payment, considering mortgage affordability, and accounting for additional costs like closing costs, property taxes, and homeowners insurance.

      i) Saving for a down payment: One of the initial steps in the home buying process is saving for a down     payment. A down payment is a part of the total cost of the house that you pay upfront. It is generally expressed as a percentage of the purchase price. Saving for a down payment is important because it determines the amount of mortgage loan you will need, affects your eligibility for certain loan programs, and can also impact the interest rate you receive on your loan.

     ii) considering mortgage affordability – Before committing to a mortgage, it is crucial to assess your ability to afford the monthly payments. Mortgage affordability is determined by various factors such as your income, monthly expenses, credit score, and debt-to-income ratio. Lenders typically use these factors to evaluate your creditworthiness and determine the maximum mortgage loan amount they are willing to offer you. It is essential to carefully analyse your income, expenses, and financial commitments to ensure that you can comfortably manage the monthly mortgage payments without straining your budget.

    iii) Closing costs – These are fees and expenses that are incurred during the home purchase process. They typically include costs such as loan origination fees, appraisal fees, title search fees, attorney fees, and escrow fees. Closing costs can vary depending on the purchase price and location but are typically estimated to be around 2% to 5% of the home’s purchase price.

   a ) Property taxes: Property taxes are levied by local governments based on the assessed value of your property. The amount of property tax you will have to pay depends on the location of the property and the local tax rates. Property taxes are usually paid annually or semi-annually and can significantly impact your ongoing homeownership costs.

  b) Homeowners insurance: Homeowners insurance provides financial protection in case of damage or loss to your property due to various reasons such as fire, theft, or natural disasters. The cost of homeowners insurance can change depending on factors such as the location of the property, the coverage amount, and the insurance provider.

It is important to factor in these additional costs when assessing your financial readiness for homeownership.