Buying your first house is a real milestone. Whether you’re 25 or 55, much like having children, it can make you feel more like a grown up than many other things that you might do as an adult, including having a successful career. Owning your own home is such a traditional mark of maturity that if you have the opportunity, you might feel tempted to rush into it. However, there are a few things you should consider before moving forward.
You’ve got enough money for a down payment, and you can just swing the mortgage payments, so what’s the problem? The problem is that buying and owning a home is rarely that straightforward. In addition to extra expenses such as closing costs, you’ll need to be able to afford property tax and homeowners insurance. It doesn’t stop there either. As a tenant, when something went wrong, whether it was a broken dishwasher or a roof leak, the landlord was responsible for repairing it no matter what. Now all those costs fall to you, and you could easily spend upwards of $10,000 on certain repairs that can’t be postponed.
You don’t have to be a millionaire to buy a house, but you do need a cushion to help ensure that calling a plumber won’t mean having no money to eat for the rest of the month. If you’ve got the down payment but not much in the way of additional cash, look at ways to cut your monthly expenses. By refinancing student loans, it can lower how much you’re paying each billing period. Tracking your spending helps you identify where you’re wasting money. Make cuts where you can and consider looking at the market again in a year or so after you’ve saved up more money.
Your Future Plans
One of the many things to consider when buying a home is your long term plans. Are you planning to move away in two years? What about five or ten? In the first case, you almost certainly shouldn’t buy; at five years, it’s a toss-up. At ten years, buying might be the right choice although the old conventional wisdom about buying always being better than renting if possible doesn’t necessarily hold true. If you’re planning to be in the area for five years or more, try using an online calculator to help you determine whether buying or renting makes the most financial sense.
Your Local Market
How’s the market where you live? Is it hot or cold? While it’s a mistake to get too bogged down in predicting what the housing market is going to do, if you live in an area where prices have been skyrocketing for a while, it might be smart to hold off for a year or two because what comes up usually does have to come down eventually. This is especially true if the house you want to buy isn’t going to be your forever home. If you plan to live there for decades, it won’t matter to you if the value drops a bit before creeping back up again slowly, but if you’re moving away in five years, you could sell at a loss if the market cools considerably.
Sometimes the best reason of all is just that you want to own your own home. There’s nothing quite like that gut feeling that now is the time. However, there are other good reasons as well. In general, real estate remains a good investment although this can vary from one place to another. Even if you’re not desperate to become a homeowner, there’s something to be said about no longer living at the whim of a landlord. On the other hand, because everyone else is doing it is not a great reason for an undertaking like this. Consider your own reasons carefully before proceeding.