Figuring out where you want to live and what kind of home you want comes with quite a bit of research. Doing the research will pay off when you avoid buyer’s remorse and find a home you’ll love living in for a long time. Here are 8 helpful hints of things to consider before you decide on a home purchase.
1) Make sure the home fits your budget before you buy, not the other way around. One of the fastest ways to become “house poor” is to take on too much house and too big of a mortgage. What that means is that you’ve bought a house that’s expensive to maintain or needs extensive updates, or you’re spending too much on your mortgage payment to afford to do much else. The common rule of thumb is that your mortgage payment (including taxes and insurance) should not exceed 28% of your gross income. I suggest that you consider not exceeding 28% of your take home pay for a much more comfortable number. If the home you choose needs extensive repairs or might be expensive to maintain, make sure you’ll be able to afford those extra expenses when calculating what you can afford. Use this mortgage calculator to find out what your monthly mortgage payment will be when including taxes and homeowner’s insurance.
2) Get to know the neighborhood before you decide to move in. Spend time in the area. Visit local restaurants or coffee shops. Is it the type of place you want to see your kids grow up? Are you looking for something walkable or a place to ride your bike? If so, are there sidewalks or bike lanes around? Look for social media pages for the neighborhood to see how neighbors interact with one another. Is it safe? Look into local police call reports or criminal registries. Don’t forget about Fido. Is there a dog park nearby or will you need a fenced in yard for him to play?
3) New construction does not mean turnkey. I learned this lesson the hard way when my husband and I built a home a few years ago. Most new construction homes these days come with flat white paint, no window coverings, a 3’x3’ concrete pad by the back door, and a manual garage door. We spent what seemed like a small fortune to purchase blinds, get the inside of the house painted, and install a garage door opener for the convenience factor. This was all before we even moved in! Thankfully, we’d saved back some cash for incidentals, so we were able to pay for these things without going into debt. Then came the over-seeding of the lawn and constant watering to get the grass to grow, the landscaping, the new patio, and the new fence. The annual cost of mulch alone can be enough to make some of you shudder.
4) Consider fees that aren’t a part of your mortgage. If you live in a neighborhood with a homeowners association (HOA), it’s likely you’ll be paying an annual HOA fee to take care of common areas or a community pool or recreation area. If you have decided a condo is a better fit for you, consider how much the monthly condo fees will be and the possibility of having to pay for a parking spot. As well, don’t forget about special assessments. I had a client who was once required to pay a special assessment fee to have her windows replaced because the condo association decided they wanted to update the look of the whole building. It cost her over $5,000 on top of her monthly condo fees that year.
In addition to HOA or condo fees, consider the increased expenses for heating and cooling a larger home, or the higher water bill that comes with watering a lawn during hot summer months. Are you going to need more furniture to fill the place up? If so, is that in your budget?
5) Do you have patience with unfinished projects? If you choose a home that needs extensive renovations or a lot of landscaping work, can you live in an environment with ongoing projects? If not, can you afford to pay for work to be done quickly while you’re still working? Do you have the experience and knowledge to follow up on contractors’ work to ensure it’s been done properly? If your answer to any of these questions is no, you might want to consider a newer home with little to no maintenance needs to avoid being miserable.
6) How much stuff do I need to maintain my home? Chances are if you’re a first-time homebuyer, you’re probably moving from an apartment into your new home. If your new place requires that you maintain a lawn, replace a light switch, or shovel snow in the winter, do you have those tools? If not, consider how much you might need to spend for a lawnmower, hoses, sprinkler heads, hose reels, sprayer nozzles, shovels, rakes, and other tools. Most heating and cooling systems are going to come with filters that should be replaced on a regular basis, and the salt for that water softener isn’t going to pay for itself.
7) Do I want to spend my weekends mowing the lawn and cleaning a huge house? One of the biggest shocks for most new homeowners (outside of unexpected costs) is the amount of time it takes to maintain a larger place and a yard. While that open floor plan that doubles the amount of living space you have looks great when you’re touring a new home, think about how much time it will take you to clean it. Loving that huge backyard with the newly-stained deck? How long will it take you to re-stain next year, and will you be spending half of every Saturday during the warmer months mowing your lawn and pulling weeds? If you don’t enjoy these tasks, consider whether you can live with a smaller space or if you’ll be able to hire these out.
8) Don’t get emotionally attached to a home. Getting emotionally attached to a home is a surefire way to overspend. If you don’t consider yourself to be practical and level-headed when it comes to making big financial decisions, then find a friend or relative with your best interest at heart and ask them for help. Make sure this person isn’t afraid to talk you through the practical side of things like costs you hadn’t thought about yet or the time you usually spend with friends and family that you might have to give up to take care of various items related to the home you’re considering.
No matter when or where you decide to buy a home, just know that being financially secure before you make a purchase is always going to be step number one. If you’re already struggling to make ends meet or still paying off a mountain of student loan debt, purchasing a home will not make things any easier. Remember that it’s okay to keep renting if you’re not ready for the responsibility of home ownership. If you are ready, then enjoy the process and get ready for your adventures as a new homeowner!