Five things to do before getting a mortgage for your first home
14/05/2019 16:37 | Source: Vnexpress
If you’re excited and in good shape to buy a home, self-made millionaire Barbara Corcoran says these are the five steps for you to take.

1. Choose a home that you can afford

“Multiply your salary times four and that’s generally what you can qualify for,” that’s a simple formula Corcoran reveals to help you determine how much you should spend on your first home. 

Another simple rule is to aim to spend about 30 percent of your take home pay on housing costs. Remember that this 30 percent encompasses more than just the sticker price of the home. It should include all related costs such as taxes, mortgage interest, insurance, maintenance and any renovations needed.

You can also apply "rule 28/36", or housing costs should not account for more than 28% of total monthly income and not exceed 36% of total debt, including all loans.

advice for first time home buyers

2. Calculate your living costs

In order to know whether the monthly spending for a home exceeds 30 percent of income or not, you need to plan for your monthly expenses.

The costs will vary depending on the type of housing as well as the location and the needs of each person. In case of buying a condominium, the costs you need to know may include management fee, parking fee, monthly bills for electricity, running water, cable TV, internet, etc.

3. Select a suitable mortagage

To avoid falling into insolvency when buying a condominium, it is important to choose a reasonable mortage with affordable interest rate.

There are many housing developers that they support buyers to borrow up to 70% of the value of the home. However, experts say that is not the ideal ceiling rate, even if you are approved by banks.

The smaller the rate of payment, the greater the loan, the more interest you will have to pay, and the harder it is to be approved. According to many experts, the ideal loan rate is 20%. 

4. Check your credit score

Before trying to buy a home, you want to know where you’re at financially, which means checking your credit score.

The higher your credit score, the lower the interest rate on your mortgage, and a lower interest rate can mean significantly lower monthly payments. In other words, a high credit score means you will spend a lot less on your home in the long term. In case your score isn’t good, consider taking some time to improve it before buying a home, Corcoran says.

5. Learn about location 

Location is everything. Corcorans say if you buy in the up-and-coming areas, you won’t just become a homeowner, you could make a fortune. Her strategy for finding the next hot spot is unconventional but effective: “What I’ve always done is I’ve asked my very nice, very young waiters at new, posh restaurants: ‘Hey, where are you living?’ They’ll always cite a neighborhood I’ve never even heard of and then I go out there and shop for real estate.”

If you plan to buy a home to stay for at least a few years, you must consider such factors as: infrastructure, schools, hospitals, supermarkets, access to public transport, etc. You should also walk around the targeted area at both night and day to learn about the surroundings carefully.