Questions to ask yourself before buying your first home
Buying your first home. It’s one of the biggest decisions people will ever make and usually represents the biggest investment a consumer will make in his or her lifetime. So how do you know if you’re ready to take that plunge? Just as with kids, adults should look for “readiness” signs, as described by OpenDoor’s Heidi Knight.
“The first sign that you’re in the right position to become a homeowner is that you’re ready to put down roots — at least for a little while,” says Knight. “Conventional wisdom states that in order for your purchase to make financial sense, you should plan on staying put for at least five years.” She goes on to explain how that is the length of time it takes to begin to see appreciation on your investment, building enough equity to offset the money you spent on closing costs on the home’s purchase as well as agent fees associated with selling the home.
Knight offers questions you should ask yourself, such as if you can you see yourself staying at your job for that long, or will you be looking for new opportunities? How about if the right position came along. Would you be willing to move for it? Then there are your comfort zones. Do you like the area you’re living in, or would you like to explore other options? Are you planning on moving in with a significant other or expanding your family? “If any of these questions make you uneasy, you may want to consider renting for a bit longer or thinking about a for-a-few-years home vs. a forever home,” she says.
And then there are finances. Becoming a homeowner is expensive when you take into consideration not only the monthly mortgage payments, but also the funds you’ll need to make a down payment, closing costs, any needed repairs, insurance, etc. Online mortgage calculators can help you get an idea of what your monthly mortgage payment could be based on estimated interest rates, down payment amounts and income. Start with the maximum amount you’re willing to pay for a home and then work toward saving a down payment. Of course, the amount of your down payment could vary based on the type of financing you intend to use (FHA, VA, or conventional) and if you put less than 20% down, there may be additional private mortgage insurance involved.
Another question is whether you’re ready for the responsibility of it all and not just the fun stuff like planning a kitchen upgrade or installing new hardwood floors. “As the owner of a property, you’re solely responsible for its maintenance and upkeep,” says Knight, who asks, “Are you willing to roll up your sleeves and tackle home maintenance issues that arise?”
As for the home you seek, it’s preferable that you leave some room for flexibility. First determine your “deal breakers” such as location, number of bedrooms and bathrooms, external features like a backyard, or nice views. Then remain flexible on any other, less important features such as the cosmetics, which can always be changed down the road.
Source: OpenDoor | TBWS