What to consider before buying your first home
Regardless of how ideal your situation or the market is. It is always recommended that you take some time to fully develop a plan before you approach buying a house. Here are some things you should take into consideration before purchasing.
Can I afford it?
There is a good chance that a house may be the most expensive thing you buy in your lifetime. While we all have our dream houses in mind, we should be realistic with what we can actually afford. Let’s not make our dream home our nightmare by buying something that drowns us in debt.
Housing is more affordable now than ever with interest rates being at an all-time low, expanded tax credits, and first-time home buyer’s program. Enticing buyers to enter the real-estate market.
Buying a house is more than just the down payment and monthly mortgage. There are other costs to factor in such as closing costs, down payment, new furniture, moving expenses. Those can add up quick. Be sure to budget for these extra costs on top of the down payment and mortgage.
It is recommended to create an after-tax monthly budget of your household’s after-tax budget to have a clear understanding of the debt you can take on. Then create a monthly budget for the monthly mortgage payment and home ownership costs. It is a good idea to spend less than 50-60% of after-tax income on monthly expenses in order to budget for a rainy day.
Is my credit score good enough for a mortgage?
After you decided on the home you want and have a lump sum saved up for a down payment, it is time to get a mortgage. Lenders are more willing to give the best rates on the market to people with credit scores above 700. If you are unsure about your credit score you can get soft credit score checks. If the results come back less than ideal here are some ways to improve credit scores. Improving credit scores before buying can make a big impact in the long run.
How long do I plan on living here?
Buying a home for less than 5 years may actually cost you more than renting. There are closing fees to consider and for the first few years, payments would be going towards interest on the loan. If you can’t see yourself staying for a few years it may be a better option to rent until you decide to fully settle down.
Who’s planning on living here?
The house you buy should take into account for who will currently live here and who will be living here in the future. This will save you time and energy from having to up or downsize your home at a later date.
- If you’re single or a couple who doesn’t see kids in the future, a one bedroom may be enough for your needs. But you may want an extra guest room just in case.
- If your single who is looking to settle down, or a couple that wants kids in the future, a two bedroom would better suit your needs later on
- If you’re a pet owner a house may be a better option than an apartment.
These are just some examples of how you would go about planning on what type of home and how many bedrooms you would require. Planning ahead for the future will save you a lot of headaches when it comes to buying a home.
Location, Location, Location
The location is a very important part to take into consideration when purchasing a home.
- If you have children then it may be a good idea to find an area where they are near schools.
- Do you or the people in your household drive? If not then bus stops and routes should be taken into consideration. It is nice to be able to catch the bus 2 minutes from your home rather than walk 15minutes each way.
- Are there grocery stores, gyms, libraries, etc. nearby
- How far is it from your workplace?
- How is the neighbourhood?
It Is important to drive through the neighbourhood during the day and at night to get a feel of it before purchasing. What you see during the day can change at night. It is also a good idea to meet your potential neighbours when you have found the house you plan on buying. No one wants to spend the next 20 years of their life complaining about their neighbours.