I have seen some close friends make bad investments in home purchases, and have been put in debilitating financial positions for it. That being said, owning a house will generally pay off in the long run if you stay there long enough. Owning your own home is the American dream, and it’s a beautiful thing, as long as you are in the right position first. Here are a few things to consider before you take the plunge.
Realize this isn’t your dream home, it’s your first home
The odds that you are going to get everything you want on your wish list is slim to none for your starter home, and that’s ok. There is no reason to pick a home that is out of your means. Your first home is a means to build equity instead of paying rent and having nothing to show for it. Build some equity in an affordable home, then sell and upgrade.
Keep a Safety Blanket
If this is your first house, make sure that you have enough savings to float your bills for 6 months. This would be on top of your down-payment you are already putting down on the house. If you put every penny into the house, then lose your job, you are going to quickly be in a tough position. Make sure to include your new monthly recurring fee’s such as lawn maintenance, termite bond for the house, extra cash in case the AC breaks, extra gas it may take you to get to work from your new location etc.
Consider a Roommate
If you are looking to pay your house off quicker, or you aren’t able to continue saving as you would like to with the mortgage payment, consider getting a roommate. You can try and find a larger house than you originally intended and add a roommate to it, and your gross monthly spend can decrease and build more equity. There is nothing like having someone else help to pay your mortgage. Just make sure you can afford to pay the mortgage without a roommate. That extra income should be a nice to have, not a need to have. You can easily find roommates online nowadays if you are in need. In my opinion one of the best roommate finder websites is Roommatefilter.com.
Research Comparable Home Prices, and Don’t Paying Asking Price
Finding out what similar homes are listed at it crucial. If the house you are looking at is the same square footage, school zone, date built, number of bedrooms and bathrooms as the house around the corner, but is 50k higher, you know you have some serious bargaining power. If you submit a bid 10% off asking and it doesn’t get accepted, you will find a seller elsewhere who will.
Once You Buy, Stay Put
If you are constantly buying and selling, you are throwing money away on realtor commissions and closing costs. Also, the beginning of any loan is going to be primarily interest. If you are making the minimum payments for your mortgage, you are not building much equity for the early part of the loan. Therefore, you won’t be taking much if anything with you if you don’t stay put. If you do need to move, try finding a realtor who will take a reduced commission.