Buying a home is not something to be taken lightly, so it is important to do your homework. You’re going to face a lot of challenges, ask yourself all sorts of questions, and probably make some compromises. Here are just a few general things to think about before diving into house hunting.
Buying your first home can be emotionally stressful.
Asking yourself some preliminary questions and doing your research will better prepare you for every step and hurdle. This isn’t a process you want to rush through, but it doesn’t make sense to drag it out too long. Be realistic about the time, effort, and stress involved in home ownership, and face the challenge with knowledge and surety.
Buyer’s remorse is the sense of regret one feels after making a purchase larger than their finances allow. No pressure, but buying a home may be the biggest decision and most expensive purchase of your life. Buying a home before you’re ready could get you in over your head, but if you buy the right home at the right time – within your budget – you’ll be able to look forward to the challenge rather than resenting it.
Are you financially ready for this?
For some households, paying monthly rent is a waste of money. It’s not like the rent money is being invested into a home that can be maintained to the resident’s preference, and there is no opportunity to get that money back by selling the house. But paying monthly rent is simpler than mortgages, taxes, insurance, and utility bills. Also consider the cost and time requirements of additional responsibilities like repairs, updates, lawn care, etc. Every household is unique, so look into your finances and run some hypothetical numbers.
Are you ready to stay put for 5-7 years? From a financial stand point you should plan on living in your home at least 5 years before trying to sell. Because of the way mortgages are set up, selling the house too early could hurt you financially. Initially, you are paying more in interest during the first few years of homeownership. This goes down around the 5 year mark, thus we suggest following the “five year rule”. There are also closing costs anytime you buy or sell a home which can be over $1000. Of course there is an exception to every rule, so read more about the five year rule to see if it applies to you.
Save, save, save. Down payments are generally 20% of the purchase price. You’ll be glad to have money set aside, not only for the down payment, but for moving and home maintenance expenses. Also, how is your credit score? This will affect your mortgage options because it reflects your creditworthiness. A low credit score may leave a borrower stuck with high interest rates while higher scores will open up more favorable terms. Before you begin house hunting, you should check your credit score online at AnnualCreditReport.com or another similar service.
It’s kind of a big deal.
Hopefully you are convinced – buying a home should not be taken lightly. There are many factors to consider before, during and after purchasing your home. You may have decided you need more time, or you’re on the edge of your seat ready to take the next step. Either way, when the timing is right, with the right realtor and a solid understanding of home buying, you will find the right home.