Dream Home: What You Need to Ask Before Buying
Buying your dream home can be one of the best decisions you make. But your experience with homeownership depends largely on how you approach the purchase.
One of the worst things you can do is jump into a home purchase before you are ready. If you have a change of heart later on, you can’t walk away from the house. So before you make an offer, here are three important questions to ask yourself.
1. Can I Afford It?
According to a 2014 survey by the Demand Institute, more than 40 million Americans spend more than 30% of their income on housing every month. Ideally, your house payment should not exceed 28% of your gross income.
Before you begin the search for a house, use a mortgage calculator to determine what you can comfortably afford. And remember, being pre-approved for a certain amount doesn't mean you have to spend this amount on a property. By keeping a home purchase under budget, you’ll have more available cash for other expenses.
Also, familiarize yourself with home value trends in your area. If prices are steadily increasing, waiting six or 12 months to buy can have a significant impact on how much you pay. CoreLogic forecasted a rise in home values by 4.7% between December 2016 and December 2017. According to this prediction, a home priced at $200,000 today could sell for $209,400 next year.
2. Where are Interest Rates Headed?
When rates are stable—neither increasing or decreasing—you can afford to take your time. But if mortgage rates are rising, buying sooner rather than later saves money. Taking advantage of lower rates reduces your mortgage cost over the course of 15, 20 or 30 years.
3. Where Do I Want to Live?
If you purchase a home in a location you don't like, you might soon regret your decision. A study by the Joint Center for Housing Studies at Harvard University looked at common reasons for buying a home. Among the reasons included finding a good place to raise children so they can get a good education, and finding a place where the family feels safe. So narrowing down the right location is just as important as finding the right house. Familiarize yourself with different areas. Check school ratings, get to know the community and only purchase if you can see yourself living happily in this location.
You work hard and deserve a home that meets your needs. Therefore, buying a home isn't a decision to take lightly. The secret to a positive experience is staying within budget, getting an affordable interest rate and selecting the right location.