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Preparing yourself financially before buying real estate

On Behalf of | Jul 28, 2023 | Real Estate Law

Real estate is one of the most significant investments you will make in your lifetime. Whether you are buying your first home or investing in property, preparation is the key to a successful purchase. The real estate market can be competitive, so financial readiness is essential to secure the property you desire.

The steps you take to prepare financially for buying real estate in New Hampshire will help you navigate the process smoothly.

Understanding your financial situation

Before you dive into the real estate market, take the time to understand your financial situation thoroughly. Start by checking your credit score as it plays a crucial role in mortgage approval and the interest rate you will receive. Aim to improve your credit score if it is less than stellar.

Additionally, calculate your debt-to-income ratio. This figure is another factor that lenders use to determine your eligibility for a mortgage. If your ratio is high, you may need to pay off some debt before applying for a mortgage.

Organizing your finances for a mortgage

Lenders need to see that you have a stable income and can afford to make the mortgage payments. Gather all necessary documents, such as pay stubs, tax returns and bank statements, to show your income and assets.

Set aside money for a down payment. While the typical down payment is 20% of the home’s price, there are loan programs that require less. However, a larger down payment can lower your monthly mortgage payments.

Planning for the expenses of buying a home

Real estate purchases involve more than the listed price of the home. You also need to account for closing costs, home inspections and property taxes. Start saving early for these expenses. For closing costs, you should aim to save between 2% to 5% of the home’s purchase price.

Prepare for ongoing costs associated with homeownership, including property taxes, insurance and maintenance costs. These expenses should factor into your budget when determining how much home you can afford.

Buying real estate in New Hampshire is a significant financial undertaking. With careful planning and organization, you can set yourself up for a successful property purchase.