5 Questions to Ask Before Buying Your First Home
May 17, 2019
The average age of today’s first time home buyer has increased to 32, with many people waiting well into their 30s or 40s to invest in a home. No matter where you are on the home purchase age spectrum, the decision to buy a home is a major—and exciting—decision. You might be feeling overwhelmed as you enter this world of new terminology and seemingly endless potential landmines.
Asking yourself these 5 simple questions can put you on the path to owning and affording your first home.
How much of a down payment can I afford?
The first consideration as you move closer to home ownership is coming up with a down payment. Historically, families paid about 20%. Today, most first time buyers pay about 5%. Spend some time thinking about how much you can save. This will ultimately determine how much you can afford, and what type of loan you need.
Remember that you’ll also have some additional costs, such as closing costs and inspections, so budget for these. If every cent goes to your down payment, you might not have enough for other common expenditures.
What will my monthly payments be?
Time to take a long, hard look at what you can afford. The amount you currently pay in rent is a good starting point. Remember that your mortgage payment is just one component of your monthly expenses. You may also have to pay property taxes, homeowners insurance, and in some cases, mortgage insurance. These can tack several hundred dollars onto the baseline mortgage cost.
Home ownership also comes with some unexpected expenses. So it’s wise to put aside a little each month in case your home is damaged or needs routine maintenance.
How will property values change in the neighborhood I’m choosing?
The ideal home investment is one that increases in value over time. If property values plummet, you could end up under water on your mortgage, and perhaps even lose money if you ever sell.
It’s tempting to find the nicest and cheapest house you can, but neighborhoods matter. Don’t just focus on the house. Focus on the surrounding area. Look at property trends, school districts, and other factors that drive value. While a large house in a mediocre area might be tempting, a better investment is a smaller house in a trendy or soon-to-be-trendy neighborhood.
Do I plan to move again, or is this a forever home?
A starter house is a great way to dip your toe into the waters of real estate. But some first time home buyers only want to do it all once. There’s no right way to invest. It’s important, though, to know your goals.
If you choose a starter house, ensure you invest in an area where property values are increasing. If this is your forever home, leave enough money in your budget for renovations, and ensure you’re allowed to make changes to your home over time. After all, trends change and your needs might shift.
Do I have a clear understanding of the condition of the house?
An inspection is critical to understanding whether the house has been damaged by floods, termites, electrical issues, or anything else that could impact the home’s stability and safety. Invest in a quality independent inspection. Then use that information to estimate the costs of any repairs that need to be made. You can often negotiate these repairs as part of your purchase agreement. Some repairs, however, will be your responsibility as the buyer. So make sure you don’t spend all your money on the down payment and other moving expenses, since other costs will await you on the other end of home ownership.
ArrowBrooke is Dallas-Fort Worth’s premier neighborhood, offering exceptional and well designed homes for affordable prices. We’d love to help you choose a first home that’s safe, well-designed, and perfectly maintained. Give us a call to learn more!