Here is the # 1 question you should ask yourself before buying a home
Buying a home is often the biggest and most impactful purchase a person will make in their lifetime. And it’s not for everyone: Those planning to move in less than five years and those who don’t have a lot of time for maintenance are among the groups who might want to say no to the purchase. But for many of us, it’s a rewarding, ultimately financially beneficial decision, especially since you can find 15-year mortgage rates close to 2% and 30-year rates below 3%, like you. can see it here, which is always close. all-time lows (although most experts expect rates to rise in 2022). Yet here’s what to ask before you buy.
1. Can I Really Afford to Own a Home?
Jacob Channel, senior economic analyst for LendingTree, says the biggest question homeowners should ask themselves is whether they can really afford the home they’re considering buying. âAs a general rule, you should aim to keep your monthly housing costs less than or equal to about a third of your monthly pre-tax income,â Channel explains. Total housing costs include mortgage principal and interest payments, as well as insurance, taxes, utilities, and all other expenses associated with the house. Other things to consider are having money set aside for ongoing repair costs, which experts say should be around 1% of the purchase price of your home. âIt can be very difficult to manage finances if you are spending too many resources on housing,â Channel explains.
2. And beyond that, do I have enough savings?
Whether you can afford the down payment, closing costs, and monthly payments on a home, and whether you’ve saved enough beyond that to live your life, are two different questions. This is because in addition to housing costs, you need to make sure you have enough savings for moving costs, upgrades and repairs, and an emergency fund. And, adds Greg McBride, chief financial analyst at Bankrate, remember that your emergency fund âwill be needed more than ever once you own it. A proven track record of saving money is a good prerequisite for home ownership.
3. Have I taken the necessary steps to obtain a loan?
Have you done all you can to increase your credit score? Can you easily get financial statements and other documents you will need to buy a home? If you think you are ready, get quotes from 3 to 5 lenders, comparing not only interest rates, but also terms and fees.
4. Am I ready to take responsibility for a household?
“Homeownership is an important commitment and if you are not prepared to devote the time, money and energy to keeping your home in good shape, then homeownership might not be possible. not suit you, âsays Channel. Indeed, a 2021 BusinessWire survey found that more than half of homeowners have made improvements to their property since the start of the pandemic, with 66% of homeowners spending more than $ 1,000 on improvements or repairs over the course of this period. the last year. And 76% of homeowners surveyed say they have at least one job they dread as an owner.
5. Do I plan to stay home for 5 years or more?
âOtherwise, you can’t recoup the transaction costs involved in buying and selling,â says McBride. And Holden Lewis, real estate and mortgage expert at NerdWallet, says, âAsk yourself if you are ready to put down roots or if you are at a point in your career where you may need to relocate in the next two or three years. “
6. Does this house fit into my future plan?
Think about what your life could be like in a decade or more. Do you want children, would you like a place where it is easy to retire? Then ask yourself: does this house fit this plan?
7. What are my must-haves and what are my dealbreakers?
Make a list of requirements on what you don’t want to compromise on and what you agree to compromise on. The real estate market is competitive right now, and the last thing you want to do is get caught up in the frenzy and find yourself with a home that doesn’t really work for you.
8. Have I done my due diligence on the house and the neighborhood?
Doing a thorough analysis of neighborhood safety, school district ratings, nearby parks, proximity to stores, restaurants, pharmacies and more can give you a better idea of ââwhat to expect in your future. district.
9. Do I have the right real estate agent?
Justin Feil, real estate agent at The Feil Group in Los Angeles, says sellers are meticulous in selecting their listing agent, but buyers are often very nonchalant when deciding which real estate agent will represent them when buying property. their new home. âBig mistake! Why does it matter? When you finally see your dream house appear on your feed, remember that you and everyone else on planet Earth see it. At this point, you are literally in camp. Mount Everest base. Now you have to get the house – obviously for the seller money is talking about, but often these deals don’t just come down to money, but also to terms, positioning, relationships of your agent. and much more, âexplains Feil.