If buying a home makes sense for you, then it is time to start looking at what you need to do to make the home buying process smoother…
If you have come to the decision that buying a home makes sense for you, then it is time to start looking at what you need to do to make the home buying process smoother. Smoother can also mean saving you time and money!
Buying a house is a major milestone in your life. When you buy a home, you are making a long term investment decision in your future.
Notice that I said long term…
It is very important that you understand the process so you can take the first step toward your future financial security.
Too often, I see people rushing into buying a home. The whole concept of owning a home has been romanticized and put upon a pedestal. Let me say that there is ABSOLUTELY nothing wrong with NOT buying.
It is better to NOT buy than it is to buy before you are ready!
Buying a home before you are ready can actually be a negative move that will hurt you. It is important to determine where you are in life so you know if it’s the right time to for you to buy a house.
Your age has nothing to do with whether or not buying a home is a good decision for you. The decision depends on your personal circumstances. How can you determine for yourself whether you are ready to buy a home?
Ducks in a Row
One of the first steps (and one of the most important) is getting your finances in order!
Is your credit score looking healthy? Have you paid off your credit card debt, student loans or personal loans? A few years ago, lenders were giving mortgages to anyone that could fog a mirror. Which turned out to not be very smart on the lender’s part…
If your credit is banged up, it is important to clean up your finances and pay down your debts BEFORE you start looking for a home. Some lender may still be willing to give you a mortgage. But this may NOT be your best option since it means a higher interest rate and more fees. Also you may be adding more debt before you are ready.
Cold Hard Cash in the Bank
Buying a home is NOT like buying a car. Despite some cars costing the same as some homes, it is NOT the same thing. While there are some ways to buy a home with very little cold hard cash in the bank, the truth is you really do need to have some money saved.
Many people buy a home with only a 3.5% down payment. Or they may use USDA financing and not put any money down.
You Will Still Need Closing Costs
You can ask the seller to pay your closing costs but remember this means you are financing the closing costs for the term of the mortgage. And it means the seller is going to add the closing costs on TOP of what they are willing to take for the home.
You Can Doesn’t Mean You Should
If you take the time to discuss all the various options available to you with your lender, you may be able to save money. Or you may be able to buy a home with very little money down. Or both!
You Must Decide What Is Best for YOU
Another reason to have some cold hard cash in the bank is so you have money for repairs and improvements. After you move in you will get a rude awakening by how all the little things you now need start to add up. Curtains, blinds, area rugs, new door locks, etc etc.
It Adds Up Quickly!
Having a sizable down payment will save you thousands of dollars in interest over the length of the loan. If you have a bigger down payment, it means you are creating equity in your home faster. Which is better!
Can You Afford It?
This is yet another time I MUST say just because you can doesn’t mean you should. While the tighter lending requirements of today are meant to prevent people from taking on more than they should, it is still possible to screw yourself.
Many experts say you shouldn’t have a monthly mortgage payment that is more than 25% percent of your take home pay – including taxes and insurance.
If you stretch yourself too much it means that if your income drops for any reason – you will quickly find yourself in hot water. Always hope for the best but plan for the worst!
There was a time, long long ago, that I was proud that I could fit everything I owned into my tiny little car and move at the drop of a hat. I eventually wanted to settle down after quite a few years of sowing some SERIOUS wild oats…
Are you really ready to put down roots?
Can you see yourself living in this home for a long long time?
Or are you still considering moving elsewhere in the country or living abroad?
Is there a possibility your job/career will mean you need to relocate in just a few years?
Buying a Home is a Long Term Investment
Housing trends have changed. Just a few years ago, people were moving more often. Now that has changed as people are staying in their homes for a longer period of time. If you think you might move in the next five years, you might want to think twice about buying a home and rent instead.
These are just a few things to think about before buying a house.