Making the decision to buy your first home is an exciting one. From researching locations to finding and viewing properties, it’s easy for first-time buyers to get caught up in the thrill of purchasing their dream house. Before allowing yourself to get carried away, there are key factors that should be considered regarding the investment.
As a homebuyer looking for a starter home, the first step should involve asking various questions that will determine if the time is right. Considering factors like your financial situation, personal life or career status will help you understand if you’re ready to invest in your starter home. Below are just a few questions that relate to your readiness to buy your first home:
Have You Considered All Costs?
All too often first-time homebuyers base their budget on the sale price of the home and the mortgage payments they will have to make. The reality is that buying a home comes with an array of added costs that are generally overlooked by new buyers. These hidden costs include those coming from home inspections, appraisal fees, closing costs, moving expenses, homeowners insurance and an array of others.
Homebuyers should consider all the costs that come with buying a home so as to have a comprehensive understanding of what they are getting into. Thinking about these added costs can also help minimize their impact, such as comparing homeowners insurance rates online to find the most affordable insurer to work with through platforms like CoverHound.
Do You Have Enough Money Saved?
Having money saved up prior to purchasing your first home is beneficial for a number of reasons. First off, it allows you wiggle room in case any renovations or repairs need to be made prior to moving in. Second, the more money you have saved, the more likely you are able to provide a substantial down payment. Down payments are crucial to getting you a good rate on your mortgage.
Is Your Credit Score in Good Standing?
Your credit score plays a major role in determining what interest rate you will receive when taking out a home loan. Before thinking about buying your starter home, take a good look at your credit score and decide if it’s the number you want to go in with.
If you made some financial mistakes in the past and are now working on improving your credit score, it may be best to hold off before buying a home. Holding off and waiting for your credit rating to increase will pay off immensely in the long-run and is often times worth the patience.
How Long Do You Plan on Living There?
Real estate agents and financial experts generally suggest the “five year rule” when buying a home. Although there are other factors that influence how long to hold on to your starter home, the rule states that it takes roughly five years for homeowners to recoup the expenses of buying and selling.
If there is any doubt that you will need to sell earlier, consider holding off on the purchase until you’re in a good position to settle down.
Are You Buying with a Significant Other or Individually?
Most first-time homebuyers today are less likely to be married than in previous years, according to a Zillow analysis. Buying a home with a spouse or domestic partner can be beneficial for the process, as combining resources and cash gives you more options and capabilities.
If you do decide to buy with another person, make sure to have some ground rules and go over any concerns or questions either party might have. This will help you avoid any unforeseen complications that could come up in the years following the purchase.
Are You in the Right Place in Your Career for this Investment?
This questions not only considers your current place of employment, but also the stability of the job, whether you are considering career changes or any other employment-related concerns. When looking to buy your starter home, make sure every factor that involves your career is stable and secure, and you’re not considering any major changes.
Buying a starter home is an exciting time for first-time buyers. At the same token, it can be a challenging and confusing process. Asking yourself the questions listed above, and any others that may be relevant to your situation, will help in avoiding future obstacles in the near- or long-term future.