If you’re planning on buying your first home, congratulations. This is an important step in securing your life financially. However, just like any other important decision you make in your life which will have great ramifications on your future, you need to consider a lot of factors before committing to the place you want to buy. And it’s not just about your financial situation right now but how things will be down the line. Not only do you need to make sure you can afford the place, but that the property’s value will go up a few years down the line. You also need to consider:
The Question of Affordability
That should be the first thing you ask yourself. Can I afford to buy a house right now? Of course, only you can answer that question. And the answer involves your current financial situation, your job stability, whether you actually need to buy a house or not. For example, if your job is the type that involves a lot of travelling and relocating then a promotion down the road might force you to move cities or even countries. But if you have a stable job and you can afford it then buying a house should be a priority. Low-interest rates are making it a lucrative option to buy a property these days.
Getting a Mortgage
Getting yourself into a mortgage is something you need to think about carefully. You’re looking at years of debt. Also, it’s not easy to get a mortgage. Financial institutions will consider things like the state of your credit. Your income, your debts, liabilities and assets are all considered before a loan is approved. Also, your credit score will decide if you can get that magic 5% interest rate or not. On average only people with a credit score of 700 or above will get that rate. So you need to check your financial situation carefully.
What the Future Holds
One thing that most home buyers tend to not think about is where will they be in 5 years. Will you still be living in this part of town? What are your future prospects? As a rule, if you are not planning on spending the next 5 years in the house you buy then it’s not worth sinking all the money you plan to invest there. Of course the longer you stay in the house the more likely you’ll get back all the expenses you put in it. It doesn’t make sense to buy a place then leave it empty because other obligations force you to move cities.
Is it Worth it?
Whether you’re buying a house as an investment or to actually live in it, the house’s future value should factor in your decision to buy. It’s true you can’t predict the market trends but certain indicators might give you an idea of whether this is a good investment or not. The area you’re buying a house in is it growing or dying? Are people moving in or are they leaving it to greener pastures? Also, it might help to ask the current owners why they’re selling. They might have a good reason to flee this part of town which would be a good sign not to invest in it.
Buying with another Person
Buying the house with your partner can be a solid decision financially speaking. Not only will you be able to afford a bigger house, but the monthly payments will be lighter being divided into two incomes. Pooling resources together also improve both your chances of getting the bank loan. So even if you credit score not that high, but your partner who also has a stable job will put their name on the deed, that will make it easier for the bank to accept your application. That said, remember that buying a house together is a big commitment. It makes it easy to buy the place but also difficult to sell when the time comes to move to another place.
Monthly Payments and other Considerations
Once you found the dream house and secured the loan, the monthly payments start. Your monthly payments are a combination of principal, interest, property tax and insurance. This hefty chunk taken out of your income at the beginning of every month is something that will continue for years. And while the bank will make sure you can afford it, you need to ask yourself can you actually live with it. Will it affect the quality of your life you’ll be living on ramen for months on end?
Buying your first house is a good investment decision but you need to be aware of the financial consequences of such an important step in your life.
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