So you’re thinking of buying a house. Maybe you want to raise your growing family in a spacious three-bedroom house or you want to make a long-term investment on a home in an up-and-coming neighborhood. Whatever the reason, you probably have a checklist of “must-haves” for the house of your dreams. But do you have a checklist of “must-haves” for yourself? The financial responsibilities and burdens for a house are big, especially with over-the-top real estate prices and hefty loan payments. And because a house is one of the biggest purchases you will make in your life, you need to make sure that you are absolutely ready.
Go through this checklist and find out 7 things you need to do before buying a house.
You can manage your budget.
Do you keep all your receipts and jot down how much money you spend on day-to-day basis? Do you have a grasp of your large expenses and plan the amount you should be spending every month? If you have dreams of buying a house, this step is highly important. Having a budget will help you to set financial goals, to build wealth, and to identify unnecessary expenditures and redirect that money to something more essential. It will also help with making timely payments for your monthly expenses and debts.
It takes time and practice to have a functioning budget, so if you haven’t already, create one and start abiding by it!
You have control of your debt.
If you have a car or you attended a private university, chances are you have a debt. And when you buy a house, you might need to apply for a mortgage. Borrowing more money from the bank means you’ll drown even more in debt, so if you don’t have control of your payments, your credit score will go down. Banks don’t like to lend money to people who can’t pay their debts on time, so even if you get approved for a mortgage, the interest rates will be high. If you do have debt, start by paying off your high-interest debt to make it easier on yourself to manage your mortgage.
Only when you have control over your loans should you consider buying a house.
You’re capable of managing your own home.
The biggest difference between renting a home and owning one is having a landlord. They will come to the rescue if something breaks, free of charge. When you own a home, however, you won’t be able to depend on a landlord to take care of the maintenance. So if you absolutely cannot bear to fix things yourself and pay for it yourself, you should go with renting rather than buying.
You have money in the bank.
Say a natural disaster hits your home. Are you ready to pay for the damages and recovery costs? Or say you lost your job because the economy isn’t doing so well. Monthly payments don’t stop just because your income has. No matter what unpredictable events take place, you should have a fund set aside to cover for such emergencies. If buying a home means pulling money from the emergency fund, you should wait.
Banks in Malaysia will pay up to 90% of the sale price. That sounds amazing, right? Wrong. Actually it means you need to pay 10% up front in cash for the down payment. So if you plan on buying a RM500,000 house, you’ll need to pay RM50,000 up front. If you want a lower interest rate on your loan, you’ll need to pay an ever bigger amount for the down payment. And let’s not forget about the miscellaneous fees and charges that come with buying a house. Transfer of ownership title, legal fees, insurance for your loan, government taxes, and bank processing fees for the loan are just to name a few, and the total for such fees could come out to 5% of the sale price. For example, a house valued at RM500,000 could entail RM25,000 in fees and charges alone.
So if buying a home means your bank will be collecting dust, you should wait until you have some leeway.
You have a reliable income.
Are you ready for long-term financial commitment? You better be because mortgage payments need to be paid every month for decades. Current interest rates go for 4.75% for a standard home loan, so if you want to buy that RM500,000 house, you’ll be paying more than RM2,000 per month for a 30-year tenure. Don’t forget that you’ll also have to pay for property taxes, utilities, and insurance, all of which could rise in prices over time.
You shouldn’t allocate more than 30% of your income to housing loans, so having a reliable income is absolutely necessary to commit to such a long-term payment plan.
You’re ready to settle down.
What do people who want to travel the world, try out different jobs, or live in different cities have in common? The answer: they are not ready to settle down in one place. Buying a house means making a commitment to live in one place and to make timely payments, so if you are still do not have a stable job or a 5-year life plan, you shouldn’t consider buying a house just yet.
You’ve done your research.
You know what you absolutely want out of your house. You know which items are necessities and which are luxuries. You know which locations are good for investment, for your kids, or for your commute. You fully understand your financial situation. If you have done all your research, then there is a good chance that you are capable of making a sensible decision.
If you were able to check off most of the things on the list, you are ready! Go forth and conquer. If not, don’t worry! Use this checklist as a guide to help you prepare for the big purchase. And once you’re ready, check out NuProp for a huge listing of newly launched properties, where you might find the house of your dreams.
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