While the housing market continues to skyrocket, you may be thinking about purchasing a home yourself. Buying a home is a big commitment and an experience that can either be easy or a headache.

As you ponder over whether you should jump into the market and finally buy your first home, here are some main key points to consider:

1. Should You Buy or Rent?

Are you ready to buy a home? There are pros and cons to each, and this is where you should start as you consider buying!

Pros of Buying:

• Money going towards purchase
• Pride of homeownership
• Power to increase value
• Freedom
• Possibility for profit when you go to sell
• Tax benefits
• Potential rental income

Pros of Renting:

• Easy to move
• Landlord handles repairs
• No property taxes or homeowners insurance
• Possibility to find a furnished rental
• Credit score isn’t as important
• Freedom to move more often

Cons of Buying:

• Responsible for repairs and maintenance
• Housing market can change at anytime
• Most loans require a down payment
• Pay property tax and insurance
• Harder to relocate
• Could be “stuck” with a house

Cons of Renting:

• “Throwing away” money
• Unable to make changes to space
• Require deposit
• Meeting “pet-friendly” requirements if pets are allowed at all
• Landlord can sell home (if renting a stand-alone property)
• Hard to find in the right location

2. Can You Afford to Buy Right Now? How Much Home Can You Afford?

Overhaul your finances and thoroughly check your budget. Do you have the money for a down payment? How much do you make each month? How much can you budget for a mortgage payment?

For most conventional loans, a 20% down payment is required. There are other loans out there that don’t require any down payment. Look for first-time home buyer loans or the FHA loan. If you don’t have a 20% down payment, you may be required to pay a PMI (private mortgage insurance), which is a separate cost included in your mortgage that you will have to pay.

Write out all of your expenses. Budget is key to saving and maintaining a solid and realistic goal for how much house you can afford. To simplify, look at your budget and see what you have to work with. As a standard, about 30% of your income should go to a mortgage payment.

3. What is Your Credit Score?

You need to consider your credit score and know first-hand what you are working with before you head to the banks for a loan. Credit scores range from 300-850, and the higher your credit score, the better.

A credit score of 620 is about the lowest to be considered for a loan, but most banks/credit unions are looking around the 720-740 range. Having a high credit score would help you get the best interest rate and the best terms.

4. Where Should You Go to Apply for a Loan?

Start with the bank you currently use, another bank, and at least 2 credit unions to see what they all offer. Having a few quotes allows you the ability to choose what will be best for you. Keep in mind they will be running your credit, slightly “dinging” your score, so don’t get too crazy and get quotes from too many companies.

Do your research and choose highly recommended lenders. Ask around for referrals from family, friends, and coworkers. If you already have a Realtor in mind, ask for their recommendation!

5. Get Pre-Approved Before You Tour

The housing market is moving fast – and to be taken seriously by sellers – having a pre-approval letter in hand is a must. While you’re at liberty to search via portals such as Realtor.com and Zillow.com, you don’t want to fall in love with a house that you toured without an approval letter.

This can also impede on your budget, and you will look at homes that you have not been approved for price-wise. While you tackle the fiscal responsibilities that come with buying a home, start a subliminal search!

Make a list of what you absolutely NEED in your home, then a list of the things you WANT in your home. Purchasing a house doesn’t need to be a hassle, and who knows – your dream property could be closer than you think!

Looking for your new home in Wilmington, North Carolina? Check out our featured property LaRue!