If you feel the time has come to buy your first home than
I agree. Home ownership is almost always a better choice than renting but there
are a few things to consider before you go for it.
Longevity Counts
Provided that you don’t expect to move again within the
next few years than you have no problem here. If there is a chance however that
you will be offered a better job half way across the country or decide that you
want to live in China in the near future than you may well lose money when you
resell your home. There are costs associated with both buying and selling a
home and it’s not reasonable to expect your home to increase in value enough in
a short period of time to cover these costs.
Nationwide the average home increases in value around 5%
per year. Based on this average it takes 3 to 4 years for most homes to
increase in value enough to cover both the buying and selling costs. Naturally
this time period will change depending on the exact market conditions in a
given area.
Be Sure You Get
What You Really Need the First Time
Daydreams are nice but buying a home is serious business.
What’s the point in buying a 2 bedroom home when you have 1 child and another
on the way? Plan ahead at least 5 or 10 years. Do you dream of the perfect in
law apartment for Mom? Be sure that your first home is one that you can be
happy in. Plan room to grow. Perhaps the basement can easily (and affordably)
be converted into an extra bedroom or 2. Maybe that space above the garage
would make a cute apartment for Mom and maybe, just maybe your best bet is to
buy a little larger home to begin with. Consider these things carefully so that
your first home is all that you dreamed it would be.
You
Know You’re Ready but Is Your Money?
Obviously if you’re currently paying
rent that you should have no problem paying a mortgage but there are a few
things you should know. While it’s almost always possible to find a lender you
should be aware that the best interest rates are reserved for those with the
best credit ratings. In a nutshell, the better your credit score, the better
terms you will be offered on your home loan. To be honest that is fair enough
but some new home buyers feel “cheated” if they can’t get the lowest rate
available or encounter additional fees due to a less than perfect credit
rating. If you know that you have several blemishes in your credit history than
be prepared not to get the “primo” deal on financing. Keep in mind that the tax
advantages of owning a home versus renting are also a “hidden” benefit.
In most instances you will need some
upfront money to cover a down payment and closing costs. Every person’s
situation is somewhat unique and it is impossible to be precise here but the
bottom line is that you will need some amount of money as a down payment for most
conventional loans. Your best bet is to speak to your local real estate
professional about this once you find a home that you are interested in.
Be
Prepared for Additional Expenses
Home ownership does entail some
additional costs including insurance, maintenance, money for additional
improvements that you may want, etc. Some communities may have a monthly
homeowner’s association fee for condos and townhomes as well. If these costs
are a concern to you than there may be some ways to reduce them. Again,
speaking to your realtor is your best bet!
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