Buying a new house is a really big deal. You want to make sure you’re ready, and to do that, you have to ask yourself some hard hitting questions.
Why do I want to buy a house?
Ask yourself – why DO you want to buy a house? Is it because your high school rival just bought one, or your significant other is wanting one? Many first time buyers rush into buying impulsively or because friends, family, and/or spouses pressure them into doing it. Sure, if prices are low, it can be a good time to buy a house – if you can afford it. You should want to own a home so you can have a stable place to live, a set monthly house payment, a property to call your own, and something to invest in – not because you’re convinced you can “flip” it for triple the original selling price in six months.
Is my life stable enough for me to own a home?
Is your employment stable enough for you to commit to a 30 year mortgage? Do you have enough money in savings to cover the cost of your mortgage for a year (at least) if not? If the answer to both of those questions is no, you are not ready to buy a house. If you’re married, is your spouse going to be around for the long term? Divorce can really screw up homeownership, and have often lead to foreclosure. Your job and your relationship need to be rock solid before you commit to buying a home.
Can I really afford to own a home?
There are a ton of unexpected expenses that come with buying a home, and there is simply no way around them. At some point, your roof will need repairs. Your closing costs might end up amounting to more than you thought they would. Your homeowner’s association might as for way more in fees than you originally anticipated. You have to budget for those things – and for the down payment. Typically, you are required to put up at least 20% of the home’s value in cash if you want to qualify for a mortgage loan. Your monthly mortgage payment needs to sit in a range that is comfortable for you, and while your lender may approve a huge loan for you, that doesn’t mean you should take it. If taking a big loan means your monthly payments are going to be difficult to make, don’t sign your name on the dotted line – not even if you love the house that’s, sadly, out of your price range for now. Want to be sure you can afford the loan you intend to take out? Use a mortgage calculator to make sure you’re staying within your price range. Don’t forget to factor in upkeep, repairs, maintenance, taxes, insurance, escrow fees, and more.
Will I want to live here five years from now?
This is less of a “make it or break it” question, but you should decide what your intentions are before you move into your new house. Do you intend to stay in your house forever, or will you move again? What are the things that would cause you to move (the addition of children or elderly parents, etc). As you’re looking at homes and neighborhoods, imagine staying there for one, five, ten, twenty, and fifty years. Does the home have what you need to be happy in all of your future stages of life? Will it have room for all of your family members, and is the neighborhood safe for your loved ones? Are the neighbors good neighbors? Will you be living near a large factory or construction site that can plague your new home with loud noises and construction cones in the road for years? Is the home situated close enough to the nearest grocery store, doctor, vet, and dentist that you won’t need to spend 45 minutes in the car to go get milk?
Is the house I want appropriate for me?
Heart-eyes for a specific house is great – you’ve found your dream home, and now you want the keys. You’ve daydreamed about how you’d decorate it, too. But be realistic. Sure, one person could live in a three story mansion if they could afford it, but would you want to pay all that money for a house so big when you can only enjoy one room at a time? Don’t fall for a house that’s too much for you in some way or another (financially, size-wise, or otherwise) just because it’s easy on the eyes or spacious. A second story is not the mark of adulthood, and a bunch of rooms you don’t need become even more money wasted when you have to buy furniture to fill those empty rooms. Sure, it’s a good idea to have a few extra rooms on hand if you know you want to expand your family or that guests visit from out of town a lot, but you don’t need five extra bedrooms. Instead, focus more on layout, structure, “green” capabilities, foundation, craftsmanship, location, and neighbors. You can add onto a small house later – it’s much more expensive to go big and then have to figure out what you’re going to do with all the extra space!
Does it meet the 85% rule?
This sounds silly, but it’s a fantastic way to gauge whether or not a home is right for you. 85% of the home should be acceptable to you, if not something you love. 10% of the home can be slated for changes in the future, and only up to 5% can be filed under “I don’t like it, but I can’t do anything about it, so I’ll live with it”. If a prospective house fits this criteria, it’s probably a great house for you, as long as the financials line up. Unless you’re building your home to your exact specifications from the ground up, there’s probably going to be something about it that you aren’t going to be the biggest fan of – and that’s okay! You just don’t want the dislikes to outnumber the likes – then you’ll realize that you’ve just made the biggest purchase of your life on a house that… you’re not really a fan of. There are certain things with every house that you won’t like, but won’t be able to change – things relating to HOA rules, property lines, trash pickup day, etc, but a few things like that are okay too. Just make sure that at absolute minimum, you really love at least half of the house.
Does the area I want to live in and the home I want to buy translate to a high resale value?
Considering this is the biggest purchase of your life, you want to make sure of a few things relating to the long term, and this is one of them. Unless you know for a fact that you don’t intend to move again (and we mean ever), you need to consider resale value. Do factors like good school districts, easy access to the nearest town, and easy access to freeways apply to your new house? They will be more important in the long term than just about anything else. Will you be able to sell the home at all? Avoid poor locations, road noise, airport noise, neighborhood nuisances, and other factors. They, obviously, also make a property incredibly hard to sell. While it may be tempting to buy a lower priced home that’s discounted because of bad location or other nuisances, most people will pass them up.
Do I trust my mortgage agents?
Your mortgage broker, your mortgage loan official, your real estate agent, and more… do you trust who you’re working with, or are they the first folks you could find to work with you? There are a ton of reasons why you should trust your agents, and if you can’t, you shouldn’t be working with them. The biggest expense of your entire lives is on their desk, and while it’s understandable that the mortgage loan officer is, honestly, mostly in this deal to make money, it’s the job description of your real estate agent to help you find your perfect home with very few to no hitches in the process – so you should trust them the most. They’re supposed to be on your side. It’s within your rights to ask about their experience, their education, and to interview them before agreeing to anything or signing any paperwork that ties you to them.