Becoming a homeowner has long been touted as part of the American dream, but daydreaming isn’t the best way to make smart financial decisions, and a home is certainly a major purchase. Do you know what to consider when buying a house?
What to Consider When Buying a House
Thinking ahead about what to consider when buying a house may not be as much fun as spending your weekends wandering dreamily through open houses. However, it does allow you to weigh your options, explore the possibilities, and put together a plan. Here’s what to consider when buying a house:
Your Finances
When evaluating your financial situation and your plans to purchase a house, Forbes suggests thinking about a few different considerations:
- How much house can you afford to buy? Your lender will review the information that you provide regarding your income and assets and offer an amount that they’re willing to lend. However, that doesn’t mean that you can truly afford to borrow that much. While you’ll need to weigh your own comfort level with debt carefully, many experts suggest that all housing costs, including your mortgage payment, insurance, and taxes, should equal no more than 28 percent of your gross income.
- How much are you willing to spend? Money spent on a home is money that can’t be used for other things. If you have plans that require a financial investment, you may prefer to spend less on a house so that you have more resources available for your other goals.
- What’s the real cost? Too many first-time homebuyers forget to look beyond a home’s price tag. Homeownership is about more than making a mortgage payment. You’ll also need to be financial prepared to pay for ongoing costs like maintenance, repairs, real estate taxes, and improvements.
Your Handiness
In theory, buying a fixer-upper offers a great way to stretch your housing budget. In reality, it can also be a way for the unwary to trip into a renovation nightmare that exceeds their skills and their allotted resources. As Investopedia points out, it’s essential that you make an honest assessment of both your handiness and the condition of any property that you’re considering purchasing. When it’s done right, investing time, money, and sweat to update a fixer-upper can be a speedy way to boost your equity. However, homeowners who overestimate their capabilities or underestimate what’s needed to bring a house up to snuff can quickly find themselves overwhelmed by financial difficulties.
The Home’s Location
There are several reasons that real estate agents emphasize location. After all, it has a major impact on the home’s value, on your enjoyment of the home, and on your ability to sell the home. Family Handyman recommends considering the proximity of the home to places you frequent like work and school. Is travel convenient? Are there parks or green spaces nearby? What is the surrounding neighborhood like? Is there a homeowner’s association? Don’t just look at a map or pictures. Before purchasing a home, take some time to drive around. Chat with a few of your potential neighbors to get a feel for the area and make sure that it’s a good fit for you.
Your Future Plans
Buying a house is a big step, but what’s next? As Investopedia explains, financial experts generally encourage people to live in a home for at least five years before selling it. That’s because there are costs involved in both buying and selling a home, and it typically takes a few years of paying off a mortgage to reach a break-even point. If you’re fairly sure that this house is exactly where you’ll want to be for the foreseeable future, then you can proceed without fear. If you’re prone to itchy feet but want the experience of owning a house, then you may want to keep a tight rein on your budget. Buying a property with an affordable price tag will allow you to reach the break-even point sooner. That way, you’ll be able to sell the property and move forward with your next adventure unencumbered, without any financial setback.
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When you’re ready to buy a house, reach out to PrimeLending Twin Cities. We’re ready to help you find the right loan product to achieve your housing goals. Contact us today.
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