Did you know that a homeowners net worth is between 31 and 46 times greater than the net worth of a typical renter? That fact is pretty astounding, and one that greatly favors homeownership. As you consider purchasing a home of your own, it’s important to make sure it’s the right decisions for your family and your finances. Below are a few questions you should be asking yourself if you’re thinking about becoming a homeowner:
1.Why do you want to purchase a home?
Everyone’s motivation for buying a home is different. Maybe you’re looking to set down roots, or you’re sick of paying rent, or your looking for an investment property. The list goes on. Since purchasing a home is the largest investment most of us will make in our lifetime, it’s important to understand why you’re buying. Your motivation to buy will help you (and your Mortgage Banker) identify a loan program that fits with your short- and long-term goals.
2. How much can I afford to spend?
If you’re thinking of buying a home this is one of the first questions that will come to mind. It’s important to evaluate your income, monthly expenses, credit, debt and much you’ve saved for a down payment. The last thing that you want to do is be house poor. Working with a Mortgage Banker early in the home buying process will give you an opportunity to prequalify and allow you to fully evaluate the impact buying a home will have on your budget.
3. Have you factored in all the costs of owning a home?
Your down payment and monthly mortgage payment are only two of the costs that you’ll need to consider as you think about buying a home. It’s also important to consider the expenses you’ll need to maintain, furnish and secure your home. These may include expenses for ongoing maintenance like housekeeping, landscaping, pool maintenance, etc. Or may be more upfront costs associated with buying a home like furniture, appliances, lawnmower and a moving company. You’ll also want to make sure your budget can handle the unexpected major and minor expenses that coming with owning a home.
4. How long are you planning to stay in the home?
Depending on the real estate market where you plan to purchase, it’s important to know that it generally takes 3-5 years to break even on the costs of buying, owning and selling a home. As you consider purchasing a home you should think about your long term plans: will you need to relocate for work, is your family expanding, will you get married, is there something that may cause you to move sooner rather than later? We know you can’t predict the future, but it’s important to make sure that buying a home fits with your lifestyle.
5. Can you still afford to save?
A leading indication of a healthy budget is the ability to put aside money every month for savings. As you think about buying a home, and potentially increasing your monthly expenses, you’ll want to understand how this might impact your ability to save long term. You don’t want to put yourself in a situation where you’re sacrificing your retirement or struggling to pay your car loan and credit cards.