Buying a home is a major decision, and it is not one to be taken lightly. Whether you are a new college graduate looking for a starter home or a married couple getting ready to start a family, there are a number of things you should look at before deciding to buy a home.
Perhaps the most important thing you should do is make sure you can pre-qualify for a mortgage. The mortgage pre-approval process is an easy one, and once you have that pre-approval document you can start shopping in earnest. Knowing you’re pre-approved for a mortgage will give you peace of mind and allow you to get on with these other 3 vital home buying considerations.
#1. Is Your Credit In Order?
If you do not know where your credit stands, now is the perfect time to find out. A recent law entitles you to a free copy of your credit report, so there is no reason not to find out.
Once you know exactly where your credit stands, you can work to improve your score and qualify for a mortgage with the lowest interest rate possible. The better your credit score, the lower your interest rate, and your monthly mortgage payment, should be.
#2. Can You Afford the Ancillary Expenses?
Determining how much house you can afford is harder than you might think. You may think that a mortgage payment equal to your current rent payment would be affordable, but keep in mind that you will be responsible for any needed home repairs and regular maintenance, as well as property taxes and other ancillary expenses.
You will need to look at the whole picture, from the monthly mortgage payment to the property tax bill and expected home repairs, when determining how much home you can really before. It is a good idea to err on the low side, since that will give you more wiggle room if something goes wrong.
#3. Do You Plan to Stay for awhile?
Home prices tend to rise over time, but they do not go up in a straight line. If you do not expect to stick around for at least three years, you might want to rent a little longer. Making a short-term move could mean selling into a down market, and that could cost you a lot of money.
That does not mean you cannot buy a home if you do not plan to be there for the long term. Just be aware of the risks and make your decision accordingly. If you would be comfortable renting out the house if you have to move, taking the home ownership plunge could still be a smart move.