Homeownership has its perks, but it’s not guaranteed or something that happens accidentally. Becoming a homeowner requires focus, work and lots of patience. To prepare to purchase a home there are a few things that you need to do before you dive in and start scheduling showings:
- Prepare your finances: When buying a house several other costs are part of the purchase, including down payment, Realtor® fees, home insurance, property taxes, title fees, lender fees etc. It is essential to make sure you have a rough idea of how much you will need to bring on closing day. A mortgage lender or Realtor should be able to give you estimates of the initial and ongoing housing expenses. Roughly, a down payment is 20% of the purchase price, and lenders typically won’t approve loans requiring more than 25% of your take-home income. Doing things to increase your credit score can also help when looking for a mortgage loan. TIP – Don’t be afraid to chat with a few lenders about what loans and requirement them might have. It’s always good to have options.
- Commit to a location: Purchasing a house is a long game, not a short one. The rate of return on a housing investment significantly increases the longer you hold it, your equity grows, and your home appreciates over time. If you have a job that moves you around quite a bit, consider renting until you settle into an area.
- Buy the right house: Buying the wrong place or too much house can lead to buyer’s remorse — or worse: foreclosure. Team up with a knowledgeable agent so you can find the right home for your needs (and negotiate the best deal for your wallet).
In other words, renting is still your best option if you’re strapped for cash or planning to live somewhere for a couple of years. The upfront costs associated with buying a home can amount to thousands of dollars, and — pandemic-induced seller’s markets aside — it can often take years for your home’s value to increase.
Ultimately, responsible home buying involves lots of preparation (and perhaps even more patience), and only you can determine when and if you’re ready. Even after purchasing a home, the work of being a homeowner begins and requires the same diligence. Make sure and count the costs before leaping.