Have you been dreaming of buying your first home, but not sure where to start? You’re not alone. It’s a milestone many people would love to reach. However, in a time where the housing market is booming and, in most areas, it’s very much a sellers’ market, buying a home can seem a little out of reach. All of us here at EPM are here to make sure that is not the case! Being informed is key in this ever-changing real estate market. So, we’ve launched our Planning for Homeownership series to give you some of our best insights into the process to help you navigate this exciting chapter in your life.
Ready or Not
First off, you might be wondering if you are really ready to buy a home and if you can actually afford one. There’s a lot to consider when making a big investment like purchasing a home. You may need to adjust your spending and saving habits, and think about how owning a home will affect your long-term goals. Budgeting and finance are not always easy or natural to a lot of people. You might consider talking to a financial planner to figure out ways to make this possibility a reality. Just like we are the experts in lending, financial planners are the experts in personal finance that can give you clarity and make the budgeting process much less daunting, and more attainable.
Risks and Rewards
When evaluating whether or not you are ready to purchase your own home, make sure you know the rewards and potential risks that come with it. Homeowners don’t have to worry about their payments increasing on a fixed-mortgage like renters do. The interest rate and principal stay the same. Once you have paid off the interest early in the loan, your money goes directly toward paying off the home. You also have the potential for your home to increase in value over time, which will help build your wealth naturally.
Some of the risks of owning your own home would be things like having to endure all of the repair and upkeep costs for the property, this is another place where budgeting and planning come into play. Also, if you default on your loan and don’t make your monthly payments, you could risk foreclosure, or having the bank sell your home to pay your outstanding debt to them.
Being Prepared for Costs and Fees
Once you discover that you want to buy a home, you must find out if you can actually afford to purchase a home that you want. Next, make sure you understand all the costs that come along with purchasing and owning a home. You will have one-time expenses such as the down payment, closing fees and moving costs. In addition to recurring monthly expenses like your mortgage payment, condo fees/homeowner’s association dues, utilities, repairs, and general upkeep. If you’re already in a purchased home and are looking to upgrade, additional expenses may include repairs or renovations to increase the value of your existing home and real estate agent commissions.
If you want to keep your monthly costs down, you may consider taking more time to save for your home purchase so you have a larger down payment. Paying more for your home upfront allows you to finance less, making your monthly payments lower and in many cases more affordable.
We hope you have found this week’s blog helpful in determining whether the timing is right for you to purchase a home. Make sure to check back for more in the future to get additional tips and terms in our Planning for Homeownership series.