For most, buying a home is the biggest transaction you’ll make in your lifetime. Before the process begins, you need to be sure you can get a good mortgage, handle the payments, and, most importantly, be comfortable with your decision. Being honest with yourself and asking the right questions before you buy can help you avoid financial headaches later on.
Here are five questions to ask before buying a home.
Can I afford the down payment?
The minimum down payment typically required begins at 3.5 percent on FHA loans to 10-20% for conventional loans. Do you have enough available cash to make this payment? There are several programs that can assist you with the payment but most of the funds will come from you. As you tally up how much you need don’t forget to consider closing costs.
Am I financially stable?
Purchasing a home is a financial commitment. You shouldn’t try to make the purchase unless you have job security and a steady income. In today’s economy, 100 percent job security isn’t promised, so you should be comfortable to handle your mortgage payment even if you temporarily lose your source of income. The best way to prepare is to save about four to six months worth of living expenses. This amount should include your mortgage payment, bills, food, and other necessities.
How long do I plan to stay here?
If you think you won’t be staying in the area for long, buying a home may not be your best option. Experts don’t recommend buying a house you don’t plan to stay in for at least five to seven years. Living in a home for an extended period of time gives you the opportunity to build up equity and make up for the costs of buying, selling, and moving.
Does the home need work or improvements?
If the home you’re buying needs additional work, it may not be worth the money to purchase. Before you buy, make sure the home passes all necessary inspections. If anything in the home needs to be remodeled or repaired, include the costs in your budget. If these expenses are too high, you might want to reconsider purchasing.
Am I ready for the challenges that come with buying a home?
When you own a home, you are responsible for everything that goes on inside of it. If the refrigerator dies or the air conditioner breaks, the responsibility of replacing or fixing them falls on you. Before you buy, you need to have money set aside for possible repairs. Damages never happen when you’re ready. If you aren’t prepared for immediate costs that may arise, you might not be ready to purchase your first home.