5 Tips To Keep In Mind When Buying Your First Real Estate Property
When buying your first real estate property, you need to do proper research on it to ensure that your investment will net you a profit several years down the line. And before you sign on the agreement, there are a few things you have to take care of so as to make the transaction smoother and more profitable for you.
- Pay The Required Down Payment
When you are buying a Lake Keowee real estate or investing in a property at some other place, make sure that you do make the down payment as required by the lender. Generally, a bank will expect you to pay up 20% of the property price as down payment. If you pay less than that, there is a strong chance that you will be required to pay for private mortgage insurance. This is an extra fee you will have to pay every single month of the loan period and is designed to protect the bank from any default on your part. Usually, private mortgage insurance works out to about 1% of the loan amount. By paying the 20% down payment, you can avoid such charges.
- Consider Closing Costs
When calculating overall acquisition cost of the property be sure to include the closing costs as well. Else, you won’t get a true figure. Closing costs can go up to 7% depending on the lender. As such, for a loan of $100,000, you will have to cough up $7000 extra. This is obviously not a small amount and should not be neglected when deciding the affordability of the loan.
- Stay Away From Your Retirement Funds
When people are unable to meet the down payment and closing costs from their savings, they might be tempted to withdraw from their retirement accounts. This is a bad idea. By withdrawing before you are 59.5 years of age, you will have to pay 10% tax on the withdrawn amount. A better option is to apply for down payment assistance programs.
- Have A Healthy Credit Score
Only apply for a loan once you confirm that you have an excellent credit score. Usually, banks will expect you to have a credit score of 650 or higher. This will ensure that you get the loan at the cheapest interest rate and at the best terms. The lower your credit score is, the more interest you will have to pay. And considering that you will be repaying the loan for 20 or 30 years, it is better to take some time to raise your credit score to 650 rather than pay a higher interest rate.
- Get Pre-Approved
Before you start looking for a home, make sure that you are pre-approved for the loan. By having the finance ready at your disposal, you will have greater freedom while shopping for homes. You might come across a very attractive home and can easily acquire it since the finance is already available. In contrast, if the loan had not been pre-approved, you will have had to pass on the opportunity.