It was the best of times. It was the worst of times. Those words aren’t just the opening lines of A Tale of Two Cities; it’s also the most accurate way to describe buying a house. Looking at new homes for sale is exciting. Every home for sale that you look at could be your forever home. At the same time, it is terrifying. You have to think about your budget. You have to worry about buying a home with unseen termite damage. You have to stress about the future outlook for the neighborhood and job market. Buying a home could be the best decision you’ve ever made, or it could be the biggest mistake you’ve ever made.
However, if you are on the cusp of buying a home, don’t let the fear of the unknown stop you. We’ve put together a quick-reference guide of what you need to know before buying a home.
Three Things You Should Know Before Buying a Home
- Crunch the numbers before you do any home shopping.
One of the most common home buying mistakes that people make is not understanding what impact their home purchase will have on their monthly cash flow. Less than a decade ago, you could get approved for a home loan for much larger than you could afford. After the real estate crash in 2010, stricter stipulations were enforced that require you have an income of at least five times what your monthly mortgage payment will be, to ensure you can afford it. However, your mortgage is only a small piece of what your monthly homeowner costs will involve. If you have an FHA loan, you’ll have to pay for mortgage insurance (in addition to homeowner’s insurance). You’ll have to pay property taxes. You might be subject to HOA fees. You’ll have to pay for maintenance and repairs on your home, and that requires extra money.
We aren’t saying this to scare you out of buying a house. On the contrary, we’re saying this to help you have the best experience possible when you buy a house. Before you do any home shopping, take an honest look at your finances. To create a home buying budget, calculate what 20% of your monthly income is and use that as the baseline for what you can afford. Buying a house within your means will ensure that you love your life in your new home, rather than spending every day stressed about how you’ll cover all your new costs. - Shop for a neighborhood, not just a home.
Another common mistake people make while buying a house is finding the home of their dreams in the wrong neighborhood. You make modifications to your home to turn it into a home that you love; you can’t do much to change the neighbors or the commute time or the part of town you live in if you don’t love it.
While you are shopping for a new home, you should be very choosy about the areas that you look. Walk around the area and get a feel for it. Research the crime rates in the area. Learn about the schools; even if you don’t have children, this will have a big impact on the resale value of your home and the type of people who live in your area. - Buy a home you can grow into.
Another common mistake people make when buying their first house is looking for a home that meets their needs today, but not in the future. We know, you probably don’t have a crystal ball to tell with certainty what your life will look like in five or ten years. But you might have an idea of the direction life is taking you. If you are reaching middle age, you might want to consider what you want retirement to look like. Maybe you want to have extra space to focus on your hobbies. Maybe your children will be nearing an age where they’ll be leaving the nest. You might want to consider a home with rooms that convert into other usable space when you have less people living with you. Maybe you need room to grow your family. Whatever your longterm future looks like, consider looking for a home that aligns with that.
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