Buying a new home (whether it is your first home or you have decided to move) is a huge financial decision, and sometimes a big milestone in your life. You may still be paying off student loans, building an emergency fund or planning for your retirement. However, even with these goals in your life, buying a home is not out of the question. Here are a few questions you will need to consider before you start looking into your future.
What can I afford vs. what loan will I receive?
You may be shocked to learn what you will qualify for when you first start looking for a home. Remember though, there is a difference on how much you can afford as opposed to how much you can actually afford based on your individual financial situation.
Am I comfortable with the monthly payment and can I make it work?
Make sure that you are comfortable with your payments. Take in to account maintenance, repairs, utilities, taxes, and insurance. This may cause you to question what you really can afford.
Have I thought about the added costs that come with owning a home?
Much like the above, there is more that comes with a house besides just the cost of the home. A new home comes with many responsibilities. If you are moving to a larger home, remember that the cost of utilities are going to go up. It will cost more to both heat and cool your home.
In providing maintenance, whether you decide to hire someone or do it yourself, you will come across added costs. From roof repair to yard care, you will need to devote both time and money into your home. One rule of thumb to follow would be the 1% rule. If your home is worth $200,000, then you can assume that your annual home maintenance repair will be around a yearly rate of $2,000, or $167 a month.
What are my long-term lifestyle expectations?
Is this home going to be your forever home? Is this the home you plan to raise a family in and retire? If your answer is no, then make sure you think about that when searching for your home. Only purchase what you can afford now, and remember that the future can hold much greater things for you.
How much house can I actually afford?
You do not want to end up house poor, or give up on having fun outside of your home. You want to take vacations, spend time with family, go out to eat, save for retirement. Look ahead at your future and don’t let your mortgage interfere with your life goals. You can do many things with your spending plan, just don’t let a large mortgage bring you down.