Homeownership is one of a person’s greatest goals in life. It is considered a vital part of the American dream and is an aspiration to many. Even though it sounds dreamy, it is a big financial decision that requires a series of well-calculated decisions. It is a journey you should only embark on if you are fully-equipped and ready. If you’re thinking about buying your very first home, here are some pointers to help you decide if it’s finally time to give it a go!
Understand Your Finances
Before you scroll through online house listings or going to open houses for your dream home, go over and audit your finances. Preparation is key for purchasing and keeping a home. This step will lead you to decide whether you are ready to own a house or if you need more time to prepare.
Only look at houses you know that you can afford. The best ratio to use as lenders suggest is 1/3 of your gross income, but others opt for payments closer to 28% for housing-related costs including mortgage, insurance, and taxes.
Don’t fixate on the purchase price because it’s just one facet of owning a house. Be sure to consider all of the dues affiliated with your potential new home. You should look out for things like the cost of insurance, homeowner association fees, and real estate taxes. Depending on where you live, those can quickly accumulate. To add, home maintenance costs can amount to the same as home improvements, so make sure to ask about extra home upkeep like air conditioning and swimming pools.
Before you get emotionally attached to your dream house, make sure to look over your monthly budget to match it up to miscellaneous fees. Ensure your monthly housing costs (including HOA fees, taxes, insurance, etc.) are going to be easy to afford.
Make Sure You Have an Emergency Fund
Keep in mind that you must only buy a home if you have an emergency fund with three to six months of living expenses. When you buy a home, there will be considerable upfront costs including the down payment and closing costs. You need money put away not only for those costs but also for your emergency fund. Lenders may even require it.
Remember: qualifying for a home loan requires a stable income. This will help you and your lender determine how much home you can actually afford. When planning a new budget, take all of your monthly bills into account, including any additional maintenance and living expenses you’ll have. It’s important to always have a good amount of money saved up so you can tap into it no matter what happens.
Find a Home That Fits Your Needs, but Think Long Term
You have a number of options when purchasing a residential property: a traditional single-family home, a duplex, a townhouse, a condo, etc. Each option has its pros and cons, so you need to decide which type of property will help you reach those goals.
The money in your bank account now will not dictate how it will be in the future. Consider your long-term plans before buying your dream house: are you planning on staying at your current job, getting married, maybe having kids someday? Depending on the market and the terms of your loan, you may not actually be able to build much equity for the first five to seven years. If you aren’t sure that your house will be the house for you in a few years, you may want to keep looking.
While money is obviously an important consideration, there are several other factors that could play a role in your timing. Is your need for extra space imminent—a new baby on the way, a new job perhaps? Does it involve your kids transferring schools?
Don’t forget to include how long you’re planning to stay because unforeseen circumstances might leave you in a tight spot. If you’re planning for short-term occupancy, purchase a house tagged lower than you can afford on a maximum.
Scout for Neighborhoods You Like Best
Having an idea of the type of neighborhood you want to live in can help narrow your search. In looking for new places to buy, it is good practice to scout the area you are planning to move to and learn as much about it as you can ahead of time.
After you’ve found some homes for sale in your price range, be careful not to make a decision based on the property alone. According to a NAR survey, home buyers are more willing to compromise on a home’s condition and size than on the quality of its neighborhood and distance from a school. Make sure you factor neighborhood quality and location into your decision.
Ask your real estate agent for information on the quality of schools around your prospective neighborhoods. Calculate your new commute times to see if they are worth it. You can even visit the neighborhood at different times and days to check for traffic conditions and noise levels and to see if people are comfortable being outdoors.
Make Sure Homeownership is for You
You don’t need to buy a house if you’re not ready for it. As you may have noticed, there are a lot of factors in play when you consider buying a residence. What you can do is test the waters: renting is a good way to start, particularly if you need flexibility. When the time comes and you’re finally ready, you will be glad that you waited just a bit longer to purchase your home. I hope you were able to pick up some points to ponder whether homeownership is the right fit for you.
Thank you for the lovely complete information that will be helpful to so many! Hope you are doing well!!
Thanks for your comment, Tom!
Good info. Easy to understand and pass on to Buyers. Thank you.