Homeownership can be one of the most rewarding and financially wise decisions that an individual or family can make. The Rhode Island real estate market is currently very desirable for first-time homebuyers, although purchasing a home can be more complicated than anticipated if a buyer is not prepared for the process. A recent media report outlines essential steps that should be taken by anyone interested in buying a home in Rhode Island.
First, potential homebuyers should know that they are ready to buy a home. According to the report, a homebuyer should purchase a home in which they intend to reside for at least five years. Although the housing market has been improving, buying a first home as an investment with the expectation that it will increase in value in the short term is not usually a good decision. A good guideline is to purchase a home with a payment that will be no more than 30% of a family’s income.
Homebuyers should have their finances in order before making an offer on a property. First, the buyer should ensure that their credit scores are high enough to obtain approval for a loan; poor credit can often be improved within 12 months or less, if necessary. In addition to a satisfactory credit score, homebuyers should have enough money saved up to cover a down payment on their desired home. A down payment should be somewhere between 3.5% and 20% of the purchase price of the house, although the more money that a buyer can put down, the smaller their monthly mortgage payment will be.
After a homebuyer’s finances are in order, and an affordable home has been found, it’s time to shop for a mortgage. Buyers can select either a fixed-rate or an adjustable-rate mortgage. Although the rate of a fixed-rate mortgage will be higher in today’s market (because interest rates are near historic lows and will likely increase over the term of a mortgage), it is generally seen as a safer decision to choose a fixed-rate loan, since the mortgage payment will be more predictable and the borrower less likely to default in the event of a rate increase.
Most homebuyers will be required to purchase private mortgage insurance when signing on a home. This insurance protects the bank in the event of borrower default, although it can be avoided by making a sizable down payment. Mortgage rates can vary significantly based on the lender as well as the terms of the loan. It is vital for buyers to shop around and find a loan that works best for them and will allow them to afford their house payment throughout the duration of the loan to protect their interest in their assets. Buying a home can be a life-changing experience for a first-time homebuyer, and the right preparation can help ensure that it’s a good investment.
Are You Considering Purchasing a Rhode Island Home?
If you are currently considering purchasing a home, seeking advice from a qualified Rhode Island real estate lawyer at the law firm of Bilodeau Capalbo, LLC can give you confidence and peace of mind to know that you’re making the right decision. At Bilodeau Capalbo, our team of dedicated real estate lawyers has the experience that our clients need to help them purchase their first home. We also have experience in the field of commercial real estate. To schedule a free consultation to discuss your situation with one of our knowledgeable attorneys, call 401-300-4055 today.