Buying a home is one of the key financial decisions that most people will have to make at one time in their lifetime. We have already addressed the question of whether you should buy a home or rent a home. In this article, we look at some examples of factors to consider before you make the actual purchase. This article does not look at factors to consider in choosing between buying and renting, but factors to consider after you have chosen to buy.
We take a brief look at some of these important factors.
The current state of your monthly budget will determine the type of house you can afford. Owning a home is great, but it should not be at the expense of other financial goals. You should carefully evaluate your monthly budget and decide the amount of mortgage you can take on every month without impeding other essential expense items (food, clothing, transport, retirement, etc.).Owning a home is great, but it should not be at the expense of other financial goals. You should carefully evaluate your monthly budget and decide the amount of mortgage you can take on every month without impeding other essential… Click To Tweet
The state of your credit score will determine the type of mortgage deals you can get. If you have a bad credit score, it will be difficult for you to get good mortgage deals. In that case, it is wise you take a pause and improve your credit score rather than plunging into bad mortgage deals. An improved credit score will get you better deals.If you have a bad credit score, it will be difficult for you to get good mortgage deals. In that case, it is wise you take a pause and improve your credit score rather than plunging into bad mortgage deals Click To Tweet
Do you have a stable job? Alternatively, do you work in an industry or company where job loss is common? If you own a business, what is the current state of the business, and what are your future expectations? Are you funding your retirement account? These factors are important to help you decide if you can truly afford a home.
Also, consider the other costs that come with homeownership apart from closing the mortgage. Can you afford the property taxes, homeowners insurance, private mortgage insurance (optional), maintenance and repairs, homeowners’ association fees, among others? When evaluating what you can purchase, you need to factor in these expense items.
The amount you can set aside as down payment is another important financial consideration. Can you set aside up to 20% of the value of this home without sustaining a “financial injury”?
All these factors are essential to your purchase decision.
The location of the property is another essential factor. How accessible is your workplace, business location, children’s school, place of worship, and other key locations in your life? We all have some key parts of our lives and some of those key parts are location-based. Are you willing to compromise on your place of worship or children’s school? Are those two as important as your workplace? When deciding on a property, the location is very important for the sake of comfort.
Does the location have important facilities and infrastructures? Are there good shopping malls, supermarkets, hospitals around? For some people, a gym or a cinema is an essential facility. It is important to know the facilities and infrastructures that are essential to your lifestyle and look for a location that provides them.
Another important factor when buying a home is the prospect of the property. This is especially important if you plan to sell the property. However, even if you don’t plan to sell, when the value of the property increases, you build up home equity, which is a valuable resource to your financial life. Look for properties in a location where there is a prospect that the value will increase rather than decrease.
What is convenient for a single person is not convenient for a couple without a child. What is convenient for a couple without a child will be inconvenient for a couple with three children. Understand your current life situation and choose a property that will give you convenience. The property should have features and aesthetics that will make life more convenient and comfortable for you.
Real Estate Market
If possible, try to buy a property during a bear market when prices are down. It is important to keep a tab on the real estate market and watch out for such opportunities (as long as time is not a factor).
At the center of it all, you must keep your financial goals before you at all times. Will buying a house help fulfill your financial goals? If yes, what type of house and at what cost? Your long-term goals should be a priority in all your evaluations.
These factors are not comprehensive. There are many other factors you need to consider. However, the more important point is to understand that none of these factors stand alone. You must consider every single factor in light of the others. Also, some factors may be more important than others for your specific case, which means you will need to make some compromise. For example, the presence of a gym is not as important as the prospect of the property. A convenient place close to your workplace may be more important than a place that is inconvenient but close to your favorite shopping mall.
The key here is to decide what is unavoidably important and evaluate all of these factors with that sense of priority.