If you feel the time has come to buy your first home than I agree. Home ownership is almost always a better choice than renting but there are a few things to consider before you go for it.
Provided that you don’t expect to move again within the next few years than you have no problem here. If there is a chance however that you will be offered a better job half way across the country or decide that you want to live in China in the near future than you may well lose money when you resell your home. There are costs associated with both buying and selling a home and it’s not reasonable to expect your home to increase in value enough in a short period of time to cover these costs.
Nationwide the average home increases in value around 5% per year. Based on this average it takes 3 to 4 years for most homes to increase in value enough to cover both the buying and selling costs. Naturally this time period will change depending on the exact market conditions in a given area.
Be Sure You Get What You Really Need the First Time
Daydreams are nice but buying a home is serious business. What’s the point in buying a 2 bedroom home when you have 1 child and another on the way? Plan ahead at least 5 or 10 years. Do you dream of the perfect in law apartment for Mom? Be sure that your first home is one that you can be happy in. Plan room to grow. Perhaps the basement can easily (and affordably) be converted into an extra bedroom or 2. Maybe that space above the garage would make a cute apartment for Mom and maybe, just maybe your best bet is to buy a little larger home to begin with. Consider these things carefully so that your first home is all that you dreamed it would be.
You Know You’re Ready but Is Your Money?
Obviously if you’re currently paying rent that you should have no problem paying a mortgage but there are a few things you should know. While it’s almost always possible to find a lender you should be aware that the best interest rates are reserved for those with the best credit ratings. In a nutshell, the better your credit score, the better terms you will be offered on your home loan. To be honest that is fair enough but some new home buyers feel “cheated” if they can’t get the lowest rate available or encounter additional fees due to a less than perfect credit rating. If you know that you have several blemishes in your credit history than be prepared not to get the “primo” deal on financing. Keep in mind that the tax advantages of owning a home versus renting are also a “hidden” benefit.
In most instances you will need some upfront money to cover a down payment and closing costs. Every person’s situation is somewhat unique and it is impossible to be precise here but the bottom line is that you will need some amount of money as a down payment for most conventional loans. Your best bet is to speak to your local real estate professional about this once you find a home that you are interested in.
Be Prepared for Additional Expenses
Home ownership does entail some additional costs including insurance, maintenance, money for additional improvements that you may want, etc. Some communities may have a monthly homeowner’s association fee for condos and townhomes as well. If these costs are a concern to you than there may be some ways to reduce them. Again, speaking to your realtor is your best bet!