Purchasing a home is likely to be one of the largest and most exhilarating decisions both financially and emotionally that you will ever make in your lifetime. It’s easy to get caught up in the excitement of house hunting. Our minds wander with the endless possibilities of how to make the homes our own. However, a home is still a financial decision with a serious impact on your future. So, how do we know the investment will be a fruitful one? There are no guarantees with homes. However, we can take certain factors into consideration to ensure we are putting ourselves in the best position.
Here are some of the most important questions to consider when purchasing a home:
Can you afford a new home?
When you buy a home, it isn’t just about making your mortgage payments, it is also about living in the home comfortably. That is why it is important not to stretch yourself thin by buying the most home you can afford. Instead, you should buy a home that will be manageable for you monthly and still leave you money for day-to-day living and even some for life’s unforeseen surprises. A good rule to follow is not to exceed more than two and a half times your yearly income. If the home is more than that, you probably shouldn’t be buying it. Also, it is good to have 20% to put down on the home to keep mortgage payments low. That is a good indicator of whether you are financially ready to take on a home or not.
How stable is your job?
Job stability is a significant factor. A home is going to a 15-30 year mortgage commitment, so you should only ever enter the housing market if you have certainty about the state of your company and your employment in it. It is estimated that for every $10k a person is seeking to earn; it takes around one month of job searching. If you intend on making $70k, your search could take you more than half a year. Before purchasing a home make sure than between your savings and any income earned by a spouse would still allow you to survive for that length of time.
What is the state of the home?
Just because the home looks great during an open house, doesn’t mean it doesn’t have costly secrets hidden all around you.An inspection should help reveal any structural problems present. That could reduce the price of the home, which is a bonus in your favor, however, if you choose to buy a home with a poor inspection and lower appraised value, you still have those problems to deal with on your own. Weigh the problems you can live with and the ones you can’t. If you have the extra money to invest into the home, there’s no sense in passing it up if it is your dream home. If you don’t have any extra income or if you are viewing the home as an investment, you may want to pass.
What’s the neighborhood like?
The neighborhood might have the single largest effect on the purchase for both buyers who are looking for a sound investment and those looking for a good community. If the neighborhood has low crime, highly rated schools, parks for recreation and nearby hospitals, homes within it tend to maintain and grow their value. Other factors such as proximity to metropolitan areas with shops and entertainment and proximity to jobs also contribute to the overall value of a home and the equity it builds. Always consider the neighborhood when purchasing a home. Take the time to ride through it at different times of the day so you can experience what it will be like living there.