Buying a house is confusing especially if you are new to this. When you ask your parents, they will tell you that the real estate market is not what it used to be, which makes it more challenging. So, before committing, you should do your homework.

The good news is that there is a financial advice method or financial guidelines that you can consider to help you make the right decision for your future. Here are some guidelines:

Look before you jump
Some people will advise you to buy as soon as possible because prices are always rising. This is a mistake. You should not feel pressured. Instead, base your decision according to the current financial situation.

Determine if it is the right time
If you have too much debt or if today’s paycheck is so thin that you cannot save for retirement or emergency, then it is not a good time to buy a home yet. It is important that you look at where you are financially before you make a decision.

financial advice method

Check your options
Are you familiar with FHA (Federal Housing Administration) loans? FHA guarantees FHA loans. It is designed for Americans with low to moderate income. Basically, it makes buying a home easy and accessible. More and more Americans consider this appealing because of the low down payment (as low as 3.5%) and low credit score (as low as 580).

Forget about the starter home
They say to always begin with a starter home, which is something small that you can easily afford – anyway, you can trade up later. This is another mistake. When you buy a home, it should work for your family right now – and will do for the coming years.

Choose a 30-year fixed-rate mortgage
You can choose a 15-year mortgage but it is better to opt for the 30-year fixed-rate mortgage because it requires lower monthly payments plus it offers greater flexibility. If you choose a 15-year mortgage, you will be committed to paying higher bills every month despite the lower interest rate.

Watch your spending carefully
In the months leading up to your home purchase, you should watch your spending carefully. As much as possible, you want to avoid actions that could potentially hurt your credit score. These actions include opening a new credit card, maxing out credit cards and purchasing a car.

Make sure that your credit score is solid
As mentioned, you need to watch your actions that could potentially hurt your credit score. You know that to get approved, your score should be solid – typically at least 650 credit score. If you want to qualify for lowest interest rates, you should start building your credit score to 760 or above. To assess where you stand, simply pull a credit report from the three credit bureaus – Experian, Equifax, and TransUnion.

Do not even think about touching your retirement funds
If buying a house means touching your IRA (Individual Retirement Account), you should not consider it. If you borrow before 60, you will be slapped with a 10% excise tax on the amount that you decide to withdraw. Making early withdrawals will force you to delay retirement so you can keep up with the payments and other expenses.