A Guide to Raising Money to Buy a Home
If you’re looking to buy a home, then you need to get pretty wise with your finances! Getting the money together to buy a home, as well as ensuring your finances are strong enough the weather the first few months of ownership, can be a pretty daunting task. Here are a few tips that will help you put your focus in the right areas!
Consider all your options
When most people think about getting the money they need to buy a home, their first thoughts usually gravitate towards getting a loan. This can certainly be the easiest option for many people, although getting a loan to buy a home – i.e. getting a mortgage – isn’t usually as easy as a lot of businesses make it out to be. Of course, there are plenty of people who aren’t all that comfortable with getting a loan to buy a home. You certainly shouldn’t think of a mortgage as your only option, though it’s worth highlighting that you don’t have that many options if you don’t have the money upfront. Still, there are other options, and you might want to consider them!
These are options that best work together, as it’s more difficult to raise all of the required amount otherwise. One option is to borrow money from your employer or from the government; this is generally done by borrowing money from your retirement fund. However, it’s worth remembering that you may have to deal with early withdrawal penalties. Combining this with another option – simply saving up for a few years – can take you much further than you might think. Unfortunately, outside of all of this, the other option is hoping money falls into your lap, either via inheritance or winning the lottery!
You need to think carefully about what sort of home you’re going to need and where you’re going to need it. Most of the time, you’ll find that there’s going to be a need for compromise. Let’s say you want to live in the city – somewhere like New York City, for example. But if you’ve got a family and you’re looking to buy a house, then you might find yourself short on options. Most cities have apartments instead of houses, and the houses that are there tend to be extremely expensive. Your dream might be to live in the city, but remember that the costs may result in you not being able to afford the quality of life you really desire.
Of course, even if you narrow your choice down to apartments, then you’ve got a wide choice available to you. Don’t assume that because you’re happy to live in an apartment that you’re still happy to move somewhere exceedingly expensive to do so. The savings you’ll make if you get an apartment outside the city can be tremendous. There are also different categories of apartments to choose from, depending on where you are in the world. HDB flats are an option for those looking to purchase properties that were used for public housing purposes. If you’re getting a loan, then you also need to think about what sort of properties your chosen loan actually allows you to buy – some have restrictions. Speaking of which…
Researching loan types
If you’re thinking of going down the usual route and applying for a mortgage, then it’s important that you understand how complex this process can be. As mentioned earlier, it’s not quite as simple as some make it out to be! The key thing to understand here is that there are a plethora of different types of mortgages. There may have been maybe three or so a couple of decades back, but now the average applicant has to choose from closer to twenty. It may not sound like a lot of fun, but it’s essential that you research all of theses loan types. Unless you do, you run the risk of missing out on the best deal you can get.
Most people are thinking about a specific type when they think about mortgages: the fixed rate mortgage. This is definitely the most common and probably the easiest to understand. It can provide the most stability for most people looking to buy a home simply because very little changes over the lifetime of the loan; the interest rate remains the same, whereas most others have rates that can be adjusted. Of course, while this sounds like the most stable, you need to research each type and consider your own financial situation (both your current situation and what you project your situation to be in the coming years) in order to figure out which type would work best for you. A traditional fixed rate mortgage might end up being more expensive for you!
Whatever route you take, you’re going to have to put a priority on saving money. You might have decided that you’re simply going to save up the money you need to buy a home outright. You may just be saving so you can make an initial payment on a mortgage and reduce your interest rate as much as possible. You may be saving to ensure you’ve got a strong credit rating that will help you apply for a loan successfully. Even once you’ve got the loan and the home, there will be a bunch of costs creeping out of the woodwork – which is just another reason to save as much as possible now!
The problem is that people tend to go about saving money the wrong way. And it’s essential that you’re as smart and practical about this process as possible, considering the fact that you’re planning on raising quite a substantial amount of money. One of the most important things here is to make sure your perspective is as effective as possible. Saving isn’t just about not spending money, which is how most people approach this. It’s also about doing the right thing with that saved money. Maybe you want to put it in a savings account, or put it in some sort of investment. In any case, there are right ways and wrong ways to save money, and errors in your method may make your goal of buying a home much less attainable.