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When it comes to buying a home, it's easy to be distracted by the idea of a cozy fireplace, wood floors, and beautiful kitchen islands. It’s totally understandable because those are the exciting things about being a homeowner, but before you decide to move forward, there are several influential factors that contribute to determining if it's a worthwhile investment for you. Don't find yourself caught up in the recessed lighting and freshly stained deck and make a hasty purchase before asking yourself the following questions:
1. Can I really afford to buy a home?
Buying a home comes with several expenses beyond your monthly mortgage payment. These additional expenses can make a big impact on your budget. Avoid becoming "house poor" by investigating the following items before buying your home:
- The amount of homeowners insurance ;and taxes you could potentially have to pay
- If there are any Homeowners Association (HOA) fees
- The average cost of utilities
- Typical recurring maintenance expenses
The term house poor refers to homeowners who are short on cash for discretionary items or struggle to meet other financial obligations because their mortgage payment requires the bulk of their income. To avoid this, I typically advise people not to buy what they've been approved for, but to purchase what they can comfortably afford. In fact, most experts recommend no more than 28% of your gross monthly income should go to your mortgage payment.
2. Do I plan on staying in this location for a while?
If you have reservations about the security of your job, the length of time you plan on staying employed in your current position, or your chances of being relocated, you should reconsider purchasing a home.
If you do buy a home with the intentions of selling within one to two years, be sure to have an adequate amount of savings. Financial obligations can be daunting if the property does not sell quickly and you're forced to pay for the home and rent or a mortgage on another property. If the market is agreeable and it seems as though it's a good time to buy, step back and evaluate if it's wise for you personally to become a homeowner.
3. Is it really move-in ready?
The term move-in ready is subjective; when looking at listings, look for words like “recently refurbished,” “renovated,” or “restored” and stay away from words like “fixer-upper.” Essentially, a move-in ready status means that no major repairs are needed—that all necessary appliances and lighting fixtures are in working condition, the flooring is free from any rips or missing tiles/wood, and the foundational elements like plumbing and electric are in working order.
What one may consider an easy quick fix can quickly turn into a home improvement nightmare. Ask the owners for repair and maintenance histories and hire a home inspector to review the property to document major and minor repair issues and defects. Knowledge of these issues can expose the history of the home, influence your choice on purchasing, and may assist you in negotiating a better sale price.
4. Is the neighborhood safe?
One of the best ways to get a better understanding of neighborhood activity is to meet and talk with surrounding neighbors. Is there a neighborhood watch? Are there annual gatherings that facilitate camaraderie within the community? Trustworthy neighbors can offer peace of mind to look out for each other's properties and the safety of children.
Consider driving by in the evening and check to see how well the neighborhood is lit. Check to see if there any hidden alleys that look dangerous and what the proximity is to the home. Things in daylight aren't always as they seem at night, so it’s best to get a preview.
5. What's the surrounding area like?
It's just as important to know what the rest of the city is like before falling in love with the neighborhood where your future house resides. Are there good school districts? What's the proximity to shopping and other attractions? Are you near noisy roads, an airport, neighborhood eyesores, and busy intersections? These things can influence your decision as well as the resell value of the home.
If you have children, it’s best to look at the school districts and examine their accreditation. If you plan on staying for the long haul, it’s especially important to visit the schools. And don't forget about your work commute, including rush-hour traffic. A bad work commute can make or break the new homeowner "honeymoon."
When you've found your dream home, there’s nothing you want to do more than make an offer, but I caution everyone to do more than sleep on it. There’s so much more to consider besides the amenities and luxuries you love before making an offer on a house. Evaluate the things you love about the home and ask yourself if you will still love it in five or 10 years. Be sure and take the future into consideration before you decide to become a homeowner.
With more than 14 years of experience in the mortgage industry, Matt Tenney has had the pleasure of helping many families achieve the dream of homeownership. As a Mortgage Banker with SWBC Mortgage, he can offer you competitive interest rates coupled with outstanding customer service.