Buying a home isn’t an easy feat. Like many large projects, it takes time, preparation and patience. Are you ready for this next significant life step? Whether you are moving out for the first time or transitioning from renting, use our questionnaire to benchmark where you are in the home-buying process, and learn the next steps!
Phase 1: Are You Ready to Buy?
Do You See Yourself in a Location Long Term?
Buying a home is not only a financial commitment, it’s a commitment of time as well. Many personal finance experts do not recommend purchasing a home if you plan on living in it for less than five years.1 You need at least five years to recover from your initial investments associated with a new home. Moving before five years puts you at risk for losing money on your investment.
Does This Timing Fit With Your Career Path?
Be honest with yourself about your current career path. Have you exhausted your upward mobility, or are you bored? Are you sick of your commute or colleagues? If you’re looking to make a professional change, hold off on buying a home. A new role could potentially mean a change in salary or benefits. Purchasing a home because it’s near a job you loathe does not reflect good long-term professional planning either. This is not to say you can’t change jobs once you move into a home, but you need to be confident in how you will pay for your home before you search.
Is Your Credit in Good Standing?
Unless you are able to pay for your home outright, you will need financial assistance from the bank. Lenders will look into your personal finance records before deciding to lend to you. Typically, the better your credit, the better your interest rate. If your credit is poor, you may want to delay buying a house and focus on improving your credit.
Do You Have Time to Look and Research?
Depending on where you want to move, housing can be in high demand and very competitive for homebuyers. You will need to manage your time wisely to stay just as competitive in your search. The process of buying a home is also very intensive and takes weeks to complete. If your lease is up in 30 days, you may be rushing it. Give yourself enough time to thoroughly search.
Do You Have a Comfortable Amount of Savings Tucked Away Outside of Your Down Payment?
The cost of buying a home is not limited to the building itself. You will have initial start-up expenses and the cost of the physical move to your new home. Additionally, since you are now the landlord of your home, any unexpected repairs will fall on you. Budget for an additional emergency fund, especially if you are not “home-savvy” and will have to outsource home repairs.
Phase 2: Ready to Buy? Here’s What You Should Consider.
Get Pre-Approved So You Know Your Budget.
Pre-approved mortgages can help prevent disappointment in your search and help you to avoid falling for a home that exceeds your budget. Know what you can afford before you step foot in a potential house. Use this mortgage calculator to help you analyze.
Know How Your Budget Will Translate Into Your Search.
Now that you know the basic month-to-month cost, consider what sort of houses fit into that range. Certain houses may have a price tag that fits your budget up front, but there may be additional costs later on.
Thinking of a “fixer-upper?” Have a professional assess the actual range of improvements that need to be made and factor that into your monthly cost. Also consider the style of the home. Certain materials require more upkeep than others. Older homes may have regular electric and plumbing issues. Look over any appliances left in the home. How soon will they need to be replaced? These are well within the range of expected home maintenance, but it’s still crucial to be prepared.
Know What Kind of Space Your Lifestyle Requires.
How often will you be home? Will you host out-of-town family members regularly? Will more people live here in the future? Consider all these factors as you contemplate the number of rooms and bathrooms you require. This is a great way to start your list of your “non-negotiables.” You want a home that matches the needs of your lifestyle. Make a priority list of what you need in a home followed by what you want in a home. When considering this, you may come to realize your needs do not match neighborhoods you’re looking in, the house style you want, etc. Consider alternate neighborhoods or reassess your needs.
Don’t Just Pick a Space That Fits You Now; Find One That Will Fit You For a Long Time.
Buying a home is just one major step in life — what’s your next one and the one after? Consider your next big commitment when purchasing a home. Now push farther and think of the next 10, 20 and 30 years. If you are planning on getting a pet, starting a family or starting your own business, ask yourself how your life plans of today fit into your home of tomorrow. Don’t forget to consider the plans of anyone who may be moving in with you. Think about how their career may change and how that could affect your home choice. You can’t plan for every major life event, but it is worthwhile to predict and prepare where you can.
Buying your first home is a major milestone in life, so do your homework. This is likely to be the largest, most significant purchase you make in your lifetime. Are you prepared? Plan ahead, be patient and get excited to take the leap into home ownership!
1HGTV. (n.d.). What to know before buying your first home. Retrieved 5 April, 2016, from http://www.hgtv.com/design/real-estate/what-to-know-before-buying-your-first-home
The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does no constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.
The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.