One of the biggest decisions you’ll make is whether to purchase a home. And just as important as deciding whether to buy a home is deciding WHEN.
When you buy a home, you’re investing in your family and your financial future. Where you live has a huge impact on factors such as what schools your children will attend, what community amenities you’ll use, and how close you’ll be to your family and friends, just to name a few.
Purchasing real estate could be one of the wisest investments you’ll ever make. But here are three things to consider before taking the plunge.
1. Rent or Buy?
It goes without saying that you would rather make payments toward your own mortgage than toward your landlord’s. When you decide to buy a home, you gain the freedom of owning your own home and benefiting directly from your investment in both the short term (tax relief) and long term (added equity).
When you decide to buy, you’ll need to consider your long-term goals and your current budget. As a homeowner, you may be responsible for costs you’re not currently familiar with as a renter, including property taxes, mortgage insurance, and maintenance or repairs on your home.
The rent vs. buy debate is something most people go through in their lives, but before you decide to buy, carefully consider the short- and long-term payoffs of owning a home of your own.
2. Are You Financially Ready?
Buying a home is an investment. Investments are designed to provide stability and give rise to financial assurance for the future. However, you’ll need to be in the right place financially before taking this step.
Before shopping for a loan product, try to get your savings to a healthy level. Consider saving enough money for a down payment and closing costs. In addition, your monthly financial picture will change after you buy a home, so you should prepare for new bills in addition to your new housing costs.
As a rule of thumb, you can strive to have your mortgage be no more than 28% of your pre-tax income.
3. Should You Wait for Better Interest Rates?
Interest rates change based on the market, but it’s hard to say where they will be 6 or 12 months down the road. Your decision to enter the market need not be based solely on market conditions. With the proper guidance, you can level the playing field by making yourself an attractive buyer. This means getting your credit in order, saving enough for the costs of buying a home, and planning your next move.
With the right preparation, you can enter the market with the confidence that you’re making a smart investment in your future.