Buying a house for the first time or the fifth time is always a significant investment. It is an investment that you need to prepare for financially; it requires research and a good understanding of the market. If you’re a potential first-time buyer, you need to be very careful about your finances because investing in a new property is a long-term agreement. You could speak to estate agents in Beckenham or Wales, and they’ll all tell you the same thing, you need to be well prepared, financially and mentally, to buy your new home. Here are a few essential things to keep in mind to prepare yourself financially to buy a house for the first time.

Determine how much you can afford

How much money can you comfortably put aside every month to pay your mortgage? How much can you put together to use as a downpayment? Do you have a budget in mind? How much will your dream home cost? What is the maximum amount of money you can spend on your new home? First, you need to make a budget. You need to determine precisely how much money you can spend comfortable in your new home. Once you have a figure in mind, start working towards saving for the down payment, applying for a pre-approval, securing a loan and paying off that loan in the given period.

Start working on your credit score

Your credit score plays a huge role in securing a mortgage pre-approval. Without a pre-approval, most estate agents won’t even take you seriously. You need to start working on your credit score at least 10 to 12 months before you even think about applying for a pre-approval. To improve your credit score, you need to ensure that all your credit card bills are paid on time, your utility bills are cleared on time, you have no outstanding debt, and you have never defaulted on any payment. It is highly recommended that you cancel all unused credit cards and ensure that you have a sufficient account balance in your current and savings account.

Save for the down payment

Usually, to invest in a new home, sellers require 20 per cent of the property’s total value as a downpayment. While this value can be negotiated by you or your real estate agent, it is recommended that you start saving the total amount for the down payment in advance. This process could take months, if not years. You have two ways to go about it. One, you could start saving a certain amount of money every month and then consider the total amount as your down payment. This, however, means that your total down payment will be decided based on how much you manage to save. The second option is to budget how much you are willing to spend on a new home. You need to calculate 20 per cent of the budget and start saving a certain amount every month to save that amount. It is always advisable to save larger sums of money for the down payment because that reduces the total mortgage value, proving beneficial in the long run.

Don’t forget about the additional costs

For most people, the cost involved in purchasing property means the property price and the mortgage interest rate. But, there are many additional costs as well as hidden costs associated with buying a new home. These include paying the real estate agent, legal fees, land and area taxes, the cost of hiring a solicitor, paying the valuation inspector and so on. You also need to account for additional expenses such as the charge of the moving company, hiring a cleanup crew to clean the place thoroughly, fixing any small damages and the cost of necessary repairs. So, you need to ensure that you have saved enough money to bear these costs without burning a hole in your pocket.

Start saving for the mortgage

Be it a 5-year mortgage or a 10-year mortgage; buying a new home is a long term investment. If there is one thing that the Covid 19 pandemic has taught us, life is very uncertain. You must have a stable supply of income so that you can pay off your mortgage with ease. You should also have ample savings for a rainy day or pay off your mortgage, when and if required. In order to save enough, you need to start as early as possible. You could start saving small amounts of money two to three years before you decide to buy a new home or you could save considerable sums in eight to ten months, but you need to practice saving. Saving is the first step to being financially prepared.