How Will I Ever Buy a Home?

   

Buying a home may be one, if not the biggest financial decision in your life. It takes research, time, effort and a host of other things. But it doesn’t have to be overwhelming. Just like other large undertakings, a step by step process can help you achieve what many call the American dream!

It’ll be 10 years this December since I purchased my home. The area is great and the home is great for my family. My home is not perfect, and of course there are a couple of things that I wished I did a little differently, but nothing too major. Overall I’m extremely grateful and happy with the decision that I made, but with it came a lot of little decisions to be made along the way.

Home Research Phase

While you’re saving to buy a home, you can begin your research. This includes the following:

  • Type of home: condo, townhouse, single-family
  • Narrowing down the area you want to buy
  • Consider local schools if you have kids
  • Consider the crime rate
  • Proximity to your work
  • Proximity to family and friends
  • Proximity to local shops and restaurants that cater to your lifestyle
  • Maintenance costs associated with owning a home
    • There are a lot of maintenance costs associated with owning a home. Depending on your specific situation some of them may include lawn maintenance, HVAC unit maintenance (which people often outsource to a company like CJS Heating and Cooling), cleaning, changing light bulbs, filters, gutter cleaning, and pest termination. I have experienced all of these several times.

If you don’t have the time for research, find a trusted real-estate agent to do some of this work for you. A great home in an undesirable location can lead to regret and buyer’s remorse.

Home Budgeting

I would recommend preparing a budget that includes estimated mortgage, utilities and all other fixed and variable expenses. You can turn to my simple money tracker template to see what a home budget should consist of.

In terms of your monthly mortgage payment, try to keep your monthly mortgage payment no more than 30% of you monthly income. So if you make $80,000 per year, you should be able to comfortably afford a mortgage payment of about $2,000 per month. This translates to a home price of roughly $300,000.

You don’t want to be in a position where you pay your mortgage and hardly have any money left for other things. And don’t forget as mentioned above to budget some money for home maintenance. Depending on the location, check the mortgage borrowing caps. For instance, if you plan to settle in Tennessee, check the tennessee mortgage options and plan your budget accordingly.

Look At Plenty of Homes

The more homes you see, the better you can understand your needs and wants. And the better you can narrow down your choices.

It’s also important to look at the major aspects of a home rather than minor details. For example, you want to buy a home that has a floor plan (i.e., number of bedrooms and bathrooms) to accommodate you and whomever else will be living with you rather than one with let’s say cosmetic updates. You can always get things like the furnace repaired and updated after buying with help from Valley Service or the like, so don’t let that be a deal breaker.

Some things are easier and cheaper to update than others. So try to imagine yourself in your home and if you’ll be comfortable for a few years or however long you plan to live in it.

If you’re planning to live alone, take a friend with you to see homes so you can get a second opinion. Maybe they will notice something important that you may have overlooked or not thought of at all.

Finding A Deal

Perhaps you’ve heard the adage that it’s wise to purchase one of the Luxury Homes in the most desirable neighborhood. It’s a saying because it’s generally accurate, after all. I’m saying generally because there may be instances where even a premium property has features you would wish to renovate in the future. In those cases, the cost will add up to roughly the same as the prices of the nearby properties.

But there definitely are some bargains out there. One example is a short sale when the seller is desperate to sell and prices the home for a lot less than the loan they owe and also probably lower than the market price of the house.

However, when you buy a cheaper home, you don’t need to live there for a long time. Just don’t get a fixed-rate mortgage and get an adjustable rate instead because the interest rate is lower. I won’t get into that too much and will save it for a different post.

The benefits are that your mortgage will be cheaper, you can take your time and fix things at your own pace, and you’ll be in a good area so your home value will appreciate faster. You can save a little bit of money and prioritize projects like fixing up the kitchen and bathrooms since those are necessities.

Be An Informed Consumer

Similar to educating yourself on home prices within your targeted location, it’s important to be aware of the fees associated with of buying a home. This takes place at the time of settlement. Settlement costs amount to roughly 2% to 5% of your home costs and can include, but are not limited to the following:

  • Appraisal Fee
  • Inspection Fee
  • Lender Fee
  • Interest Discount Points
  • Property Taxes
  • Title Insurance

Remember that a home is an investment because overtime, it typically increases in value. Apart from being a tangible, monetary investment, it’s intangible in a sense that you have an opportunity to create beautiful memories with family and friends. So get out there and find a house that you can call your home!

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Check out my simple, yet detailed Personal Capital Review here.

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