When I was 23 years old, I bought my first home. I quickly realized that it was the wrong age to be a homeowner. I was, as most people are at that age, not ready for the slog. The monthly payments started becoming overwhelming, and I had to sell my home two years later. I didn't know everything I needed to know before I bought my home.
Don’t get me wrong – buying a home can be a wonderful accomplishment and a great experience. You just have to understand whether it’s the best time for you as an individual or family.
Answer these five questions, and you just may find out if you really know everything you need to know before you buy your first home.
1. What’s Your Plan for the Next Five Years?
Before you sign the mortgage papers, pause to take a look at the big picture. Why do you want to own a home? How long do you plan to stay in one place? What do the next five years look like for you?
If you’re ready to set down roots and start a family, then buying a home can be a smart decision. But if you are just following the herd, it can become a very costly mistake.
My homeownership – while it lasted – curtailed my freedom to do so many cool things, like traveling the world.
2. How Is the Housing Market?
Are prices going up or down? Is it a buyer’s or seller’s market? Depending on the state of the market, you may have to hurry in making a decision to purchase a home, or you may have the luxury of taking your time.
Spring is usually a busy time of year for buying a home, so know that there will be lots of inventory available for you to look at.
Winter is usually the best time to get a good bargain, since there aren’t a lot of buyers available.
Plan to get in during the right season.
3. Can You Afford the Monthly Mortgage Payment?
Thanks to the housing market crisis and the current state of the economy, you must have at least 20 percent saved up to use as a down payment on your new home purchase. Obviously, the more money you have stashed away, the better chance you have of being approved for a loan. Before starting the house hunt, get pre-approved for a mortgage from a local financial institution. Take time to shop around so you can get the best interest rate and affordable mortgage payments.
Estimate your monthly mortgage payment, including homeowners insurance, interest rate, and taxes by using an online calculator. Just enter the price of the home you’ve been pre-approved for, your down payment, and the interest rate. The calculator will amortize your loan over a 15- or 30-year term and show you what your approximate mortgage payment will be.
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4. Do You Know All of the Housing Costs?
Beyond the monthly mortgage payment, are you set up to cover additional expenses like closing costs, renovating, and moving costs, as well as any furniture that you need? When I bought my first home, I didn’t realize I’d need to buy things like a lawn mower and other gardening equipment.
It’s great to have a nice yard to look at, but it costs time and money.
Most experts agree that these additional expenses add around 20 percent on top of your regular monthly commitments on the house. Check if you have enough money to spare.
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5. What Are Your Lifestyle Needs?
Are you a homebody or social butterfly? How many people are in your family and how much room do you need to accommodate them? Carefully consider how you will be using the home and make sure it fits into your lifestyle.
I personally bought a home that was way too large for me, simply because I thought I needed all that space. But with my full-time job and social calendar, I had to sacrifice a lot of time to keep my home clean and intact. Just remember: every room in your house has to be cleaned and taken care of, so make sure it fits into your lifestyle.
Know the answer to all of these questions before committing to buying a home, and then, when you’ve found the right answers, don’t wait to either move in or walk away!