The purchase of a home has long been heralded as the ultimate dream for every American. But the more than 676,000 foreclosures filed last year is an indication that owning a home is not always a guarantee of living happily ever after. Plans change, careers can go awry, and a myriad of issues can arise with the power to negatively affect the homeownership experience.
Luckily, there are some purchasing decisions buyers can make at the beginning that will help to increase the chances that their home ownership experience will always be a financially positive move for you and your family.
Buy less house than you can afford
When home buyers apply for a mortgage, the lender uses their financial information to compute a loan limit for them. While only meant to be an upper limit for which they have loan approval, the majority of home buyers will end up purchasing at or near the upper limit set by their mortgage lender. While this number is technically affordable at the time of the purchase, it only takes one unexpected loss of a job, an unforeseen medical issue, or some other crisis to make paying the mortgage and associated housing costs uncomfortable.
In contrast, home buyers who deliberately opt to purchase a home well below the amount they for which they are approved to spend are taking a proactive step to ensure that their housing costs remain affordable.
Recurring costs are as important as purchase price
Another tip home buyers can use to make sure their home will never become a financial burden is to determine the recurring costs of each home they are considering. Buyers often forget to include all the costs of homeownership when deciding how much to spend on a home.
In addition to the mortgage payment, homeowners also must also use a significant portion of their household budget to cover recurring costs, including:
- private mortgage insurance (PMI), if applicable
- home insurance
- real estate taxes
- utility costs
- HOA fees, if applicable
- any maintenance, repairs, and updating the home will need during their ownership
Before purchasing any home, it is also wise to do some research to see if the area in which you want to purchase is in the process of raising property tax rates or if any planning and zoning issues on the horizon might impact your ownership costs.
Your real estate professional can offer additional tips to help ensure that your home purchase will be a satisfying experience, no matter what your future may hold.