Buying a first home is exciting yet daunting. Many people conduct thorough research and prepare in advance; they save enough for the down payment, determine their budget and even narrow down their preferred location. But when it comes to the mortgage, people often think that’s the only option to finance their home.
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While a mortgage will still cover the bulk of your home purchase, a personal loan could help fill the gaps most first-time buyers don’t anticipate. Here are five overlooked reasons first-time buyers could consider a personal loan, including what it can provide as they prepare for a thrilling new chapter.
Cover Unexpected or Underestimated Costs
It might not be your first thought, but a personal loan can offer helpful flexibility in covering closing costs, inspection fees, moving expenses and even initial utility setup costs.
These are often overlooked during first-time home budgeting, but with a personal loan, you could have access to funds to use just for these must-haves. Ultimately, buyers could prevent financial stress and protect their emergency savings.
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Strengthen an Offer in a Competitive Housing Market
Having a personal loan can provide fast access to funds for related homebuying expenses, allowing buyers to act quickly in a fast-paced housing market. This flexibility could help with things like larger earnest money deposits or pre-move-in repairs, which can strengthen buyers’ position without them having to touch their savings.
Avoid Draining Long-Term Savings
There’s nothing worse than having to dip into funds that are saved for other purposes. Using retirement funds or large portions of savings can create long-term financial strain and put first-time buyers in a tough spot.
That’s why a personal loan could be beneficial. Buyers could preserve their financial safety net and still cover the necessary upfront expenses with ease.
Fund Immediate Repairs or Renovations
Want to make some alterations to the home? Have some repairs that can’t wait? With a personal loan, buyers could handle repairs that a seller typically wouldn’t cover, or they can easily make updates before moving in.
Unlike home equity loans, personal loans don’t require existing equity or a home appraisal, so first-time buyers could get enough money to make their new home just as they’d like before bringing in their belongings and furniture.
Improve Credit Profile Before Mortgage Application
For those eager to get a mortgage, personal loans could help consolidate high-interest credit card debt, improving the debt-to-income ratio and credit mix. This may boost mortgage approval odds, but it’s crucial to time it right and speak with a financial advisor before taking on new debt.
Smart, Flexible Support for Your First Home Purchase
Personal loans might not be for everyone, but they can be a smart, flexible option for first-time homebuyers who face cash flow gaps that prevent them from getting a home.
Before settling on a personal loan, buyers should be sure to do their research, compare lenders, check their credit score and make sure their potential loan fits into a realistic, well-planned budget.
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This article originally appeared on GOBankingRates.com: 5 Reasons First-Time Homebuyers Should Consider a Personal Loan
