Home buying considerations
Buying a home is a big financial step, however, some people do it prematurely, and others get into bad loans, or payment structures that really do not work for them. Knowing what to look for, and what to consider when buying a home, can save you from making costly mistakes. The following are a few home buying considerations:
- The price versus the value. Home prices change, but the value to you is not going to. If you buy a home because it is huge, or because you like the neighborhood, or for the value of having a yard, more space, etc. you will love it even if the price drops.
- The down payment needed. To get into a home you need a down payment, and the amount you put down will affect your interest rate, your loan terms, and how likely it is for you to get the loan you want.
- The taxes and insurance. When people buy a home and determine if they can afford it, they often look at the purchase price and interest, and that is it. They forget that in addition to that, part of the monthly payment needs to include property taxes and insurance. If those make your budget too tight, you may need to look for a smaller, less expensive place to live.
- Interest rate. The rate of interest you get is going to be determined by your credit score, your down payment, etc. however, the interest can make a big difference in how much your monthly payment is, often several hundred dollars.
- Closing costs. In addition to the purchase price, your monthly cost to pay your mortgage, taxes, insurance etc. there are costs to close a loan. There are processing fees, underwriting fees, appraisal cost, etc. So, when determining if you can afford to buy a home, consider how much the closing costs will be.
- Other expenses with buying a home. When you buy a home there are other costs, moving costs, cleaning costs, painting, yard work, utilities, hooking the utilities up, deposits for utilities and for installations of cable, internet, etc.
- Other debts. When you buy a home you have to recognize that just because the bank says you can afford a certain amount does not mean you really can. What other obligations do you have? What can you handle and still pay your other debts back?
- Job security. Buying a home means having a payment every month. While you have this withe rentals etc. as well, it is much easier to find a cheaper place to rent, etc. than it is to sell your home, etc. So, how secure is your job? Will you be able to continue making this payment if you have to find a new job?
- Potential for growth. Buying a home costs more than the price of the home, and so you have to consider if you will need something bigger in the future. If you may need something more soon, it would be wise to wait, or buy something bigger now.
- How long you will be there. If you do not plan to stay in the home for more than a couple of years, often the cost to close the loan, etc. is not going to be justified. So, how long will you there, and is buying the best option?