Interest rates are crazy low, tons of houses are on the market (meaning that there are plenty of options for buyers), and the cost of renting is going up. With all of these things in mind, the housing market is great for buyers right now.
Unfortunately, this does not mean that buying a home is right for everyone right now. Which is why there are a few things that you ned to consider before buying a home.
It’s important to consider whether or not your job and your finances are stable. How is your industry doing right now? Do you have a financial buffer? Financial buffers are important because if the worst case scenario happens (knock on wood), you want to be able to sustain yourself as you get yourself out of the worst case scenario.
If you’re in good financial condition, now you may consider whether or not you have enough money for a down payment. Depending on where you want to live and the house, you may need $8,000 to $40,000 dollars for the down payment. And you’ll have to remember the closing costs, which may be 3 to 4 percent of the total purchase price.
Cons of Homeownership
Some of the difficulties that come with owning your own home include self maintenance of the home. If you’re not willing to deal with home maintenance on your own, then purchasing a home may not be right for you at this time. There will also be additional bills that you will have to pay because you are the homeowner (e.g. cost of maintenance appliances, property taxes, hazard insurance, etc.).
More bang for your buck. Financially, it makes sense to stay in your home for 5-7 years (at least) before selling it. So if you think there’s a good chance that you may leave the area, you might want to hold off on the home buying.
Your Reasons for Buying
Buying a home is a long-term commitment that will have massive impacts on your lifestyle, your family and your finances. In other words, don’t do it unless you’re really sure you want to and are ready for the lifestyle change – don’t let someone else talk you into it. Worthy reasons renters with homeowning readiness give for their decision to buy include some or all of the following:
- You want to build equity instead of paying a landlord. Fact is, if you get a fixed rate mortgage and make the payments for the full term of the loan, you’ll eventually pay it off. That’s not possible when you’re renting.
- You want a place to call your own, where you can paint a wall purple, add a pottery spinning studio or build your dogs an obstacle course (oops – that’s my reason for homeownership!), because it’s your prerogative.
- You want the tax advantages of homeownership.
- You want a stable place you and your family can live for as long as you’d like.
Ask yourself these questions, and be honest with your answers. If you really want to buy, but your answers to these questions today don’t weigh in that direction, it doesn’t mean you’ll never own a home. It’s usually just a matter of strategically timing your purchase out a year or two when your savings, your career and your lifestyle are in alignment with the implications of ownership – consider working closely with a real estate broker and a mortgage professional to get an action plan in place and start working that plan.