Buying a home is obviously a big deal. This single purchase reverberates years down the line and essentially sets you on a long-term financial and personal path. So, before you call up a local real estate agent or schedule time with a loan officer, ask yourself some key homebuying questions.
Why am I purchasing a home?
Most first-time homebuyers embark on the home-hunting process with a certain amount of confidence, pumped up by persuasive family members and friends or driven by major lifestyle changes like marriage. Unfortunately, few take the time to really reflect on their reasoning. Don’t make this mistake – ruminate.
This question not only addresses personal concerns but also touches on important financial issues, reported Businesses Insider.
“What do you want to do with it? Are you going to live in it? Are you going to rent it? Know where you are in that life cycle,” Wesley Gunter, a Merrill Edge financial advisor, advised in an interview with the publication.
What is my financial outlook?
According to The New York Times, unemployment is the main cause behind most foreclosures. With this in mind, first-time buyers should assess their current and future employment situation. Take an in-depth dive into your finances to help you identify the kind of home you can afford now and project what sort of expenses you could incur years later. Is your industry fluctuating? Do you anticipate layoffs?
When working through this calculation, factor in your career path and other more personal variables, some of which might seem unsettling. If you are married, take stock of your life and think through possible roadblocks. Divorce is also a major ingredient in most foreclosures, reported Money Crashers.
Additionally, during this stage of the process, make sure you are working with accurate figures. Often, prospective homebuyers forget to consider the hidden costs of home ownership.
“You hear people say all the time: ‘Well, my rent right now is $2,500 and the mortgage would be $2,300. I should buy a house’,” Michael Corbett, a real estate expert at Trulia, told Business Insider. “So that $2,300 is not $2,300. It may end up being $3,500 or $3,700 when all is said and done.”
Am I confident in my location?
Buying a home means putting down semi permanent roots. So, homebuyers should make sure they are willing to commit to a certain location.
If you are willing to commit and ready to pin-point prospective neighborhoods, consider variables like crime, noise, traffic and schools, reported The Times-Picayune. Additionally, don’t forget homeowners associations. Many neighborhoods across the country feature such entities and they are not for everyone. If an HOA governs one or more of your choice housing locales, speak with current residents to get a feel for its management style.
Are you ready to save?
Once you take on mortgage payments, sticking to a budget will be essential. This includes toning down spending expectations for new home accessories and other big purchases that often come up during the home-hunting process.
“A lot of people buy this nice house, and then look at the ratty car sitting in the driveway and think, ‘We better buy a new car’,” Ellen Derrick, a financial planner at LearnVest, said. “You don’t want to get yourself into a pile of credit card debt just so you can keep up with the house.”