Homeownership might feel like the next logical step in your life, but it’s natural to be on the fence. Owning a house is a major financial investment and personal commitment. This may be the place you decide to raise a family. It could serve as the backdrop for your family’s most cherished memories. But the truth is homeownership is no longer as common nor as necessary as it used to be. Renting can be more beneficial for some people as they gain greater financial stability. Others may simply like the idea of not being tied down to one place. If you’re thinking about buying a house, ask yourself these four questions first.
Can I Really Afford It?
In addition to a down payment and routine mortgage payments, you will also have to pay annual property tax, higher utilities, maintenance costs and homeowner’s insurance premiums. The additional cost of simply living in a house can be higher than many anticipate, especially if they are transitioning from a smaller apartment to a full-size family home. You will also potentially have to pay a broker’s fee and closing costs, which can be up to 5 percent of the final sales price. Make sure you consider not just your mortgage but all the other costs of homeownership before you buy.
Do I Want to Invest for Greater Benefits?
One motivating factor for aspiring homeowners is the opportunity to build equity. With the right property value and mortgage payments, you can earn equity quickly and gain access to more financial resources. Home equity lines of credit (HELOC) act as a revolving source of financing that you can borrow and use however you want. The line increases as you pay off more of your home. This can be a great way to cover emergency costs, pay for tuition, pay off certain debts or finance home improvements. Learn more about applying a HELOC in this free guide. You can also save money on taxes with greater tax breaks including home equity, mortgage interest and discount points.
Am I Happy Living Here for the Foreseeable Future?
Liking where you live enough to rent is one thing but buying a house and investing in a community is another entirely. When you buy a property, you are also putting down roots and making a commitment. Does the neighborhood and greater town/city line up with the lifestyle you envision for yourself? Could you be happy living here for the next five, 10 or 20 years? If you have children or plan to have them soon, you also have to consider the school district and environment they’ll grow up in.
Is the Market Favorable Right Now?
Prices change annually, and you might find that the time to buy right now isn’t lining up with your budget. A great house could be $20,000 more one year than the next, so it pays to shop around and time your purchase. The fall is generally when prices start to drop nationwide, so consider launching your search around late August. This could give you time to find a place and negotiate a price before the end of the year.