Buying Your Very First Home? Two Money Issues To Consider
Are you finally ready to move out of an apartment and into a home? If so, you'll be wondering if you have your finances in order to do it. Buying a home will be a big financial commitment, which is why you want to make the right decision on this purchase. Here are two money issues you need to consider.
Do You Have Enough Saved For A Large Down Payment?
There are many types of loans that you can get to buy a home, with each having their own requirement about how big of a down payment you need. VA loans don't require a down payment, but they are only for veterans or people on active duty. It's ideal for people that are serving their country, but obviously not possible for all people to get.
Many conventional loans require as little as a 3% down payment, but know that these loans require private mortgage insurance. This is a fee that you potentially pay for the life of your loan that protects your lender in case you are unable to pay the loan. You can sometimes remove PMI by paying off 20% of the loan, but it is not a guarantee.
Ideally, you want to save 20% of the home's value for a large down payment. This gives you a better interest rate and prevents the need to pay private mortgage insurance.
Can You Rent The Property?
A first home will most likely not be the home you stay in forever. Starting a family can quickly cause you to want to expand your home, and you'll be looking to move out just as fast as you moved in.
However, there is a 5 year rule when it comes to selling a home, where it is said that you must stay in the home for at 5 five years before you pay for it financially. This is because you must pay for closing costs that can quickly eat into any profit you could make from the house increasing in value.
That is why you should consider buying a home that you can rent if you want to move out within 5 years. The rental income can help sustain both homes until you are ready to sell the house for a profit. A real estate agent like those at New Mexico Real Estate Group can help you find a home that will do great as a rental in the future.
These are only a couple money-related issues you can run into when buying your first home. Speak with your agent for more tips to deal with them.
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