8 Critical Considerations Before Buying a House
It's a dream - owning your own home.
It's a piece of the planet that you can call your own, a place where you and your family can put down "roots" and become part of a community.
Everything about looking for that home, finding one that meets your needs, and going through the bidding and buying process can be quite the exciting adventure.
But have you really considered all of the implications and elements of owning your own home?
Here are some things you will want to consider before you sign on that dotted line.
There are several steps to take in the process of looking for a home to purchase:
(1) Before you even begin to look at what is currently on the market, there must be an honest assessment of your finances. How much can you really afford? Depending on current mortgage interest rates, a good rule of thumb is that you can afford a home that is about two times your annual income with monthly payments that are about 1/3 of your gross income. This figure will narrow your search.
(2) You can conduct a search on your own through a wide variety of websites that list homes for sale in the area you want. Or you can contact a realtor and arrange a meeting. If you choose this option, you will sign a contract, and you will be using this realtor to arrange for showings and to submit a contract once you find the home you want. There are lots of advantages to using a realtor, but, if you go on your own and find a home for sale by owner, chances are you will be able to pay less. The disadvantage is that you will have to prepare the contract and take charge of the documents for the closing, which can be cumbersome and complicated. Most buyers do use the services of an attorney if they choose this option.
(3) Be sure to check out the neighborhood of any home you are considering. And this includes the schools, the local government services, the utility costs, the property taxes, etc.
Once you have decided that you really want to make a home purchase, there are other considerations as a potential homeowner:
1 - The Additional Costs of Maintenance and Repair
Perhaps as a renter up until now, you were paying a set amount of rent every month. If there are issues of repair and maintenance, these are the responsibility of your landlord, not you.
Suppose a water heater goes out; suppose a furnace or air conditioner fails; what if leaks in the roof appear and damage the interior? All of these repair expenses are the responsibility of the landlord.
Guess what: as a homeowner, all of these things become your responsibility. You need to think about the funds you have available for these types of issues.
How will you replace that dead furnace? How will you pay for that roof repair?
You need to be certain that you have emergency funds available for these events. Given that many young people today do not have personal finance coursework in their schooling, setting up a realistic budget will be a necessity.
2 - Property Taxes
Local towns or municipalities want their "piece of the pie." Unfortunately, it's part of life: property owners must pay property taxes.
Be sure that you check out the property taxes for the past several years, so you can understand what you will owe, when you owe it, and how it has increased over time.
3 - Property Insurance
Again, as a renter, you may have had "renter's insurance" - coverage that will protect your personal property that is located in the house. This is relatively cheap insurance.
As a property owner, though, you have to insure the entire structure. This is far more expensive. Sure, you can include this insurance in your mortgage payment, or you can choose to pay it on your own.
You will also have a deductible - an amount you must pay upfront whenever you submit a claim for damage to that property. And, once a claim has been filed and paid, your insurance premium is very likely to go up.
4 - Becoming a Do-It-Yourselfer
One of the things that first-time homeowners do not think about is how "handy" they are in making minor repairs to a home.
Suppose you need to replace an ice-maker unit in your refrigerator? What if a water pipe is leaking under your sink? Suppose you have to repair a fence that high winds have damaged? What if you want to remodel things, like adding new flooring, painting, or wall or ceiling repairs? Do you have the expertise to do these things?
If not, you may have to become a student of repair, maintenance, and remodeling to learn how to do these things yourself.
And if you don't, and you have to hire people to get this done, you may incur expenses that can become pretty pricey. Plan to become a student of home repair.
Fortunately, there are lots of YouTube videos that will provide "how-to" explanations of most everything you want or need to do.
5 - What You Must Pay For
There are some repair and maintenance tasks that you will want or need to pay for.
Do you want to climb a two-story ladder and clean out your gutters? Are you a licensed electrician who can make repairs to your circuitry? Can you install a new furnace or a new roof?
Probably not.
When these repairs are needed, you will have to contract out for them, and you need to plan in advance for these events - this means you must have savings to get them done.
6 - Home Value is Now Up to You
You are purchasing a piece of property, which value needs protection. It must be maintained, so that its value is held and, indeed, increases along with normal and general property values.
Homeownership is a big responsibility.
If at any point in the future, you should decide to sell your home, in order to get the best price possible, you will have to ensure that you have done all that you can to keep that value up.
7 - The Future - Selling Your Home and Moving On
At some point, you may decide to sell your home and move on. Your decision now is to sell by yourself or to incur the expense involved with using a real estate agent.
If you sell by yourself, you will be in charge of all the marketing of you property. There are a number of websites for this purpose, but you will be in charge of the photos and, of course, an amazing description of your home and property.
8 - Homeownership Means Responsibility and Expenses
Buying a home is a big step.
It means total responsibility for your property, and it means a legal commitment to make those mortgage payments, to pay taxes, and to keep the property insured.
It also means a commitment to maintaining that home so that its value increases over time. A home is probably the biggest investment you will make in your lifetime. Protect it.
