You may think that you are ready to finally purchase your dream home, but unfortunately your bank account might beg to differ. Buying a property is a huge financial commitment, probably the biggest one in your life. Therefore, you should make sure that you take the necessary steps to be thoroughly prepared before you sign on the dotted line.
Set a Budget You Can Afford
You might be rolling your eyes and thinking “Duh!” when you see this point, but it is nonetheless important. Before you decide, remind yourself that owning a house is a long-term investment that requires you to commit a rather significant amount monthly.
You also need to take other financial obligations into consideration such as your car loan, insurance, credit cards, student loans, etc., and not forgetting your daily living expenses. Therefore, setting a budget will prevent you from being overwhelmed by your monthly expenditure and end up neck deep in debt.
Review and Improve Your Credit Score
Your credit score and payment history is one of the most important aspects of your financial profile. Banks and financial institutions utilize your credit score to assess your risk as a borrower. Hence, having a high credit score means that you pose a lower risk of being unable to pay back what you borrowed.
Therefore, before you purchase a house, do pull out your CCRIS report to identify your current credit score standing and to check if you have any red flags. Having a good credit score prior to applying for a loan not only increases the chance of getting your loan approved, it can also reduce the interest rate imposed on you too!
You should also make sure that you keep up a good credit score before, during, and after you have purchased your house and gotten your mortgage. This is because the lending agencies might look at your credit score halfway through your mortgage period to see whether you are a liable risk and if your interest rate needs to be increased.
Shop for a Suitable Mortgage Plan
Instead of going for the first mortgage plan offered, take time to identify the best rates available in the market for you. Acquiring the most competitive mortgage rate can help you to save money in the long run; the lower the interest rate, the less money you'll need to pay over the course of the loan period. Rate shopping is much easier now thanks to the Internet and mobile apps available today, so merely spending a few minutes to determine the best mortgage plans can potentially save you tens of thousands of ringgit.
Develop a Healthy Savings Account
Having a healthy savings account is also essential for the lenders to know that you are a trustworthy loan candidate. Proving that you are not living from paycheck-to-paycheck reassures them that you are capable of paying your loan. Hence, it is advisable to save around 5% of your monthly salary to sustain a stable cash cushion. Moreover, this money can also be used for renovation, maintenance, and repairs once you have acquired the house.
Settle for Something that Fulfills Your Needs
Your dream home might be a large mansion with a swimming pool and a mini-theatre, but that might not be the most feasible option for you and your financial status. Hence, you should settle for a home that suits the needs of you and your loved ones without causing too much strain on your financials. For example, if you are in a stable relationship and will be looking to settle down and start a family in the next two to three years, it might be preferable to buy a larger home now that you can eventually grow into. Discuss with your family members and consider your future needs and wants to find the right home that ticks all the right boxes.
By following the tips above, you are well-prepared to buy a house you can call your own! When it comes time to apply for a housing loan, do get all the necessary documents ready so that your application can be processed smoothly.
This article was written by Vino K from CompareHero.my, a site dedicated to increasing financial literacy and helping you save time and money by comparing personal loans, credit cards, and broadband plans in Malaysia.