Real estate is one of the quickest ways to build wealth. Unfortunately, it also happens to be the most expensive…
If you think you have what it takes to reel in riches from the housing market, but haven’t got around to purchasing a home just yet, then here are a few tips to keep in mind before you get the ball rolling.
Most people don’t realize that buying a home is often the biggest purchase they’ll make in life. At the same time, it doesn’t have to be any more pricey than it already is.
There’s no doubt that investing in real estate is an ideal way to pull passive income, but when mortgage rates or initial down payments are out of your league, it defeats the whole purpose.
Prior to becoming a homeowner, you need to determine what you can afford.
Be realistic and live within your means. Don’t get in over your head with mortgage payments you can’t keep up with.
As a rule of thumb, try to keep the total amount you’re willing to borrow for a house below 30% of your gross income.
Remember, it’s not so much about what you qualify for as it is what you can afford.
Either way, some lenders will try their best to sell you on mortgages well above this benchmark. Don’t fall for it!
The less is more mindset doesn’t apply to all of these percentages though… In terms of standard down payments, it’s smart to pay off 20% or more from the get-go.
Anything less will likely lead to principle mortgage insurance (PMI), which is a fancy term for “waste of money”.
In short, it pays for insurance to protect the lender. All you need to know is that it’s worth it to pay the extra penny up front.
That said, always treat the property you own as a vehicle for making money, not a financial burden.
When you’re stretching funds to make ends meet, you’re simply paying too much.
A lot of individuals find themselves in this situation because they go for whatever mortgage has the shortest timeline.
The thing is, paying off your home faster isn’t necessarily better. It just leads to coughing up more cash in the long-run.
For this reason, experts say you should shoot for a 30-year mortgage.
Still, if you’re looking for a way to cut down on these interest rates, your credit score is the determining factor.
It’s simple. High credit score = low interest rate.
Generally speaking, lenders like to see this score above the 720 range.
Real estate is arguably the most profitable investment you can make.
As the saying goes: “you have to spend money to make money” and in the world of buying and selling homes, it’s no different.
Getting the gears turning isn’t always an easy task, especially when it involves five or six figure down payments.
But hopefully, these first-time homebuyer tips can help you out along the way.