The Intelligent Way to Buy a House
When you’re getting ready to buy your first Raleigh-area home, all of the advice seems to center around your ability to get approved and how much the online calculators say you can realistically afford. No doubt these are important considerations.
Buying your first home is a big financial decision.
But there are some other things to think about before you ever pull up Realtor.com and start searching that no one ever seems to tell you about. Taking time to ask yourself some pointed questions is a wise exercise to ensure you’re making a good choice.
Should I Buy or Is Renting a Better Choice?
Owning a home, when done right and at the right time, can be a smart choice. But is it the right time? How on earth do you know? To make this decision, you need to look beyond the traditional argument that renting is equivalent to throwing your money away, and think about a few other key things.
Is your job more permanent or transitional? When you rent, you have the freedom to move as long as you’ve served out the terms of your lease. If you’re in a transitional job, that freedom can be attractive, giving you the option to move across town or across the country if a better opportunity arises.
Are you handy or hopeless when it comes to home maintenance? Trust us – there is always something that will need to be repaired in your home. If you enjoy projects, and have a reserve fund to pay for bigger repairs or upgrades, homeownership is great. If you can barely hammer in a nail and your savings account is skimpy, leave the maintenance chores to a landlord.
How much can I comfortably afford?
Sure, there are online calculators that tell you what your debt to income ratio is. They give you a loose guide as to whether a bank will see you as a viable applicant for a mortgage. But … can you really afford that mortgage?
When you buy a house, you’re paying principal and interest, but you’ll also have monthly property taxes and homeowner’s insurance to figure in, which can add several hundred dollars to your payment. And don’t forget about maintenance and repairs. While it’s true that homeowner’s insurance is there to cover major damage to your home, it won’t cover the cost of cosmetic changes like new flooring, countertops, paint. Nor will it cover your expense if your hot water heater goes on the fritz, your oven ceases to heat, or your heating system conks out in the middle of winter.
If you have a savings account that can comfortably cover these costs, which can ding you for hundreds, if not thousands of dollars, and you’re realistic about the possibility, great. If they’ll create
a financial hardship, you should consider saving your money for a while longer and waiting until you’re in a stronger financial situation to buy.
Will I Be Living Here for at Least Five Years?
When you first purchase a house, you’ll be paying upfront closing costs, and most of your mortgage payment will be going toward interest. In fact, it takes about five years of paying on a mortgage before you’ve gained a notable financial advantage over monthly rent payments.
Make sure you love the location of your ideal house. Know what future development plans may be in the works for the area that may affect its saleability down the road. And consider whether it’s in a desirable rental area – that way if you must sell it before five years is up, you may be able to rent it out rather than selling.
What size house do I really need?
Again, this is a life stage question. Make sure you think carefully about your needs not just now, but into the future. Are you single? Then a two bedroom condo may be just perfect. But if you’re in a serious relationship, see an engagement in your future, or maybe even plan on running a business out of your home, you might want to think about getting something larger. Since buying a home is a fairly permanent decision, choose wisely, and think about whether the size house you think you need is also one you can afford.
Will I Need to Make Any Major Purchases in the Near Future?
If your car is a clunker, or you want new furniture for your home, will your financial situation, once you’ve bought a house, support that? Make sure your credit strong enough, and your income stable enough, to cover unexpected expenses once you’re locked into a fixed mortgage payment.
If you’re considering your first home purchase in the hot Raleigh housing market, we at Oak City Properties can guide you in all of the important deciding factors, help you choose appropriate financing options, and most important, help you find the right home for your situation!