Home Buying 101: A Step by Step Guide to Buying a Home.
Buying a home is a huge decision. It can affect your social life, your family, your finances, and your career. It can be a great investment or it can be a money pit. Doing it right is critical. Here’s some things to consider.
Step 1: Find out if owning a home is right for you.
OK. I know this is basic, but a lot of folks don’t stop to consider if owning a home is right for them in the first place. If you can answer yes to the following questions you’re probably in good shape. If not, you may want to reconsider.
Do you plan to stay in the same spot for the next 5 years? There are a lot of fees that go along with buying a home. When you include both buying and selling fees it may total 10% of the price of the home. With the average appreciation around 3% – 6% per year, it may take as much as 3-4 years just to break even on your home. Given this, it’s usually a good idea to stay in a home at least 5 years for it to be a good investment.
Are you prepared to maintain a home? One of the best parts about renting is calling up your landlord when the furnace goes out and saying “come fix it.” Once you purchase a home you’ll be the landlord and you’ll be footing these bills yourself. Are you prepared for that? For the average older home its a good idea to budget $200 – $300 per month for maintenance. This is in addition to any remodeling or upgrading you might want to do.
Is it a better bet than renting? As the market goes through ups and downs there’s times when it’s significantly cheaper to rent and there are other times when it’s significantly cheaper to buy. Do the math and make sure that buying makes financial sense. You can also use one of these great tools to help you decide:
Do you have some money in savings? Buying a home is expensive. Between a down payment, closing costs, moving costs, and maintenance it can really add up. Make sure you’ve thought about these things and that when all is said and done that you still have some savings leftover for a rainy day.
Does buying a home make your life easier? If you’ve ever tried to rent a home while you own a pet you know what I mean. It’s really tough. Sometimes you just get to a point in life where owning your home would make things a lot easier. Maybe you want to make sure you child can attend the same school long term. Maybe you’re just tired of moving every 2-3 years. Everyone has a different reason, but if settling down seems like a big relief then maybe home ownership is the way to go.