Choosing to buy a home is a huge decision, especially if you are buying for the first time. It’s important to consider the pros and cons of becoming a homeowner, and make sure you are in the right position financially and in the right stage of your life to take on such a responsibility.
Buying a home can end up saving you money each month, and be a wise investment for the future - if you go about it wisely. Here are some important questions to ask yourself if you are considering buying a home to learn if you are personally ready and if the home you’re looking at is the right one for you and your loved ones.
Is the Home a Good Investment?
Is the housing market booming in your area? If so, it could be a great time to buy a home, because it’s value will likely grow or at least hold steady for years to come. Try to find a home in an area that is growing in popularity - you may be able to buy low if the area is improving and resell for a much higher price when you decide to move down the road.
Don’t just consider the upfront costs, also look into things like when the home will need a new roof, how old the appliances are and when they might need to be serviced or replaced, as well as improvements and remodeling that would be required to make the home work for your needs. Sometimes the purchase price is low, but the investment required to maintain the home is too high.
How High is My Credit Score?
Your credit score is extremely important when buying a home because it determines how good (or bad) of an interest rate you will get and for how large of a loan you will be able to be approved.
To find out how good your credit is, there are a few ways to check your score. Many creditors now provide the score, so look at your credit card or loan statement. You can also request or purchase your credit report online or by mail through credit reporting agencies. Loan counselors can also help, so make sure you look into getting free counseling before you decide if home ownership is right for you financially.
Is the Home Really the Right Size?
Do you plan on having kids in the next few years? Will your children be leaving your home for college soon, and do you plan on having guests stay overnight often? Do you need extra space for hobbies, group meetings, or entertaining?
These are all important questions. Before you buy a home, make sure that it will really fit your needs. If a home is way too big or much too small, odds are you will not be happy with your decision to buy it in the long-run. Think about your long-term goals and priorities, and decide accordingly.
Do I Have Enough in Savings?
Owning a home will always cost more than you think because when you buy your own place there is no longer a building maintenance technician you can call when your sink is clogged or your air conditioning dies in the middle of summer. Paying for repairs, maintenance, lawn care, heating and cooling, and renovations can leave you with an empty bank account and a negative attitude if you aren’t prepared!
How Long Will I Live in The Home?
The rule of thumb, according to many housing and loan experts, is that if you are not planning to stay in a home for at least 3-5 years, you should not buy. Staying any less than this may mean losing money. Talk with your loan counselor to determine how long you will need to stay in the home to make a profit when you sell or at least break even.
While you can certainly keep the home as an investment property and rent it out if you choose to move, there are still costs associated with this option, like property management and maintenance. Build these costs into the rental price you charge tenants, and make sure you have at least enough in savings at all times to cover the mortgage for a few months if a renter vacates unexpectedly.
Is the Home in a Safe Location?
Always do your research to make sure the area you are buying a home is safe, especially if you are buying a home to start a family. Even if your surrounding neighborhood is very safe, consider things like the safety of public transportation and walking routes to and from the school your child will attend. Check the National Sex Offender Registry to make sure there are no potential predators around the home you are considering buying.
To find out how safe your neighborhood is, look at crime rates using the FBI’s Uniform Crime Report for your state - pay close attention to violent crimes, robbery, and home invasion statistics to get a better idea of how often homeowners are victims of theft and violence.
Should I Buy a House or Condo?
Consider a condo or townhome if you don’t think you are ready to assume the responsibility of maintaining a house. Condo’s can be a smart step toward home ownership with a smaller price tag, and often include lawn care and other maintenance. You may, however, have to pay a monthly home owner’s association fee, so factor that into your budget.
Condos also come with many of the same annoyances as apartments, like noisy neighbors a wall away, limited parking, and stricter pet policies. Evaluate your priorities and budget, and decide what’s best for you!
How Reliable is My Income?
If you are starting a business that hasn’t quite become profitable or if you or your spouse are considering making a career move in the next few years, it may not be the best time to buy a home.
It’s also a lot harder to buy a home as a single person - if you don’t have a secondary income to rely on if you lose employment you should make sure you have plenty in savings as a “just in case” cushion.
Can I Use State or Federal Benefits?
If you’re a military veteran or spouse, the first thing you should do if you are considering buying a home is to figure out what state and federal benefits you qualify for. VA Home Loans can save you thousands in closing costs, and if you are disabled, the Department of Veterans Affairs has grants available to help you adapt your new home. If you are 10% or more disabled, the VA will even waive service fees.
VA Loans require no down payment and can help you keep your mortgage payment low with more favorable financing options and no private mortgage insurance requirements.
Explore your federal benefits in our Federal Benefits Directory.