Buying your first house is one of the most exhilarating and terrifying “adult” experiences you can have. With so much to consider and always changing information regarding mortgages, house prices, what to look for and what to avoid, we’ve come up with three essential points to consider before taking the first step onto the property ladder.
The Benjamins are a family of wealthy people.
Let’s start with the elephant in the room: unless you’re really fortunate, you’ll almost certainly require a mortgage to acquire a house. And, in terms of term duration, this is the kind of loan that will likely compete with student loans — expect to be paying it down for the next 15-30 years. There are a plethora of useful mortgage rate calculators available, such as this one from MortgageCalculator.org, so play about with the figures to get a feel of what’s feasible for you.
When it comes to figures, one of the most important ones you’ll be tinkering with is your down payment. To avoid having to purchase PMI, it’s typically suggested that you put down 20% of the entire cost of the property as a down payment (private mortgage insurance). If the borrower defaults on the loan, PMI prevents the lender from losing money.
A 20% down payment on a property worth $275,000 is $55,000, according to some quick calculations. That may seem like a lot of money, but it’s a reasonable estimate of how much money you’ll need to save to secure favorable loan terms, including a low interest rate.
Placement, Placement, Placement
It’s been stated a million times, but it doesn’t change the fact that it’s true: location is crucial! When it comes to the financial requirements of buying a home, you’ll want to make sure you choose a location where you’ll be able to remain for at least a few years. This is the point at which you’ll put your renter’s hat aside and put on your possible homeowner’s hat.
Before you start looking for a home, ask yourself these questions about the area:
- How long can I actually put up with a commute — 5, 10, 15 years? What is the expected annual cost of the commute?
- Are there suitable schools within a reasonable distance if I already have children or believe I may want to establish a family in the future?
- Is it true that I’m close to the people and places I care about? Is there a nearby pharmacy or food store?
- Is there a limit to how much noise I can tolerate? Is it possible for me to be on a busier street or in a more crowded neighborhood, or do I need a calmer area of town?
On a Day-to-Day Basis
Let’s do a little role-playing with that possible homeowner hat on. Imagine going into your new house on a Tuesday after work — you’ve sorted out the mortgage and chosen the perfect location. You found the perfect home, and now it’s all coming together.
Imagine putting your suitcase down and walking into the kitchen for a drink of water — oh, fine, a glass of wine – on this Tuesday evening. The damp floor greets you as soon as you enter. The kitchen sink is leaking, and water is quickly spreading throughout the house. It’s the second time in a week that this has happened. You:
A) Hurry to the sink, take your wrench, and start working.
B) Take out your phone and dial the number for the plumber who came out on Sunday.
C) Take a seat in the growing puddle and start crying.
If you picked A or B, the responsibility of house ownership could be a good fit for you. Even if you choose C, it might still be a fantastic match for you, and Tuesday was simply a terrible day for you. But, all joking aside, when you own a house, you own it completely. Be honest with yourself before making any major judgments about whether having a house — the financial, logistical, and even emotional aspects of owning a home – is suitable for you right now.
Purchasing a house is still seen as a rite of passage – but, as with any major life choice, it is entirely up to you. And what works for someone else may not be the perfect match for you. So think about the facts, do your study, and plant your roots when and where it’s appropriate for you.
Leave a Reply