Before embarking on your first home purchase, here are the questions you must ask yourself.
If you’re thinking of buying a home, there are certain questions you must ask yourself first in order to know whether you’re making the right choice.
1. Are you financially prepared?
If a buyer doesn’t have the cash to purchase a home outright, they do so with a mortgage. To get a mortgage, you generally need a credit score of at least 620, and it takes money to raise or correct your credit score if it doesn’t meet that mark.
When using a mortgage, you’ll have to make a down payment, which usually makes up anywhere from 3% to 20% of the overall purchase price of the home. After that, you have to pay closing costs, which make up 3% to 4% of the purchase price. If you bought a $200,000 home, for example, your closing costs would equal roughly $6,000.
2. Are you prepared to make compromises?
Let’s say your approved value (i.e., what you can get financing for) is $200,000 but you’re looking to buy in a location where home prices average at least $250,000. Would you be willing to buy in another location or buy a fixer-upper? These are things you’ll want to consider.
“To get a mortgage, you generally need a credit score of at least 620.”
3. Will owning a home pay off in the long run?
When I was 20 years old and living at home, my dad asked me to get my bank book (a book you took to the bank to keep your financial balances current). When he looked at my bank book, he told me I was going to buy a property. I was scared to death, but it was the best thing he could’ve asked me to do. I ended up buying a condo for $94,000 that I later sold for $120,000. Realizing the gain from that appreciation—money I didn’t even have to work for—gave me the resources to buy my next home, which was an awesome loft in a trendy part of town.
These are the benefits homeownership brings, but you have to know whether you’re making the best decision for yourself, first. Also, keep in mind that when you own a home, you’re responsible for the maintenance, which is another issue entirely.
If you’d like to talk more about whether you should make the leap to homeownership or you have any questions about the home buying process, don’t hesitate to reach out to me. I’d love to speak with you.