First Time Homebuyers: 5 Critical Questions to Ask

QuestionsHomeBuyer

It’s the American dream, own your own home and raise your family in it. Buying your own home, actually the home buying process is a difficult and often confusing one. Here are 5 questions you need to ask yourself and discuss with your partner before you buy.

 

  • How Much Home Can You Afford?

This can be a tricky question to answer, but the best answer seems to be about 25% of your net income, that is after taxes. Lenders will typically calculate using your gross salary. Somewhere between 25% and 30% is the safe zone. Anything approaching or above 35% is the danger zone. You need to have some flexibility if other household costs unexpectedly increase, or 1 person loses their job, it should still be manageable so keep it close to 25%. Preferably you should obtain a 30 year mortgage. This will keep the maximum payment low in case of hardship, but still allows the flexibility of pre-payment of principle l to decrease the loan length and thus the interest dollars you are spending.

 

  • Am I Ready To Own A Home?

Home ownership also comes with a lot of responsibilities and costs. We will talk about costs associated with the purchase later. What I am talking about here is asking yourself questions, and answering honestly, questions like am I fiscally responsible, can I follow a budget, am I an impulsive spender, and am I able to perform normal home maintenance. Is your job stable and conducive to home ownership?

 

  • What Are The Other Costs?

There can be other significant costs involved in securing your loan, such as down payment, loan fees, moving expenses, utility deposits, to name a few. One word about loan fees, specifically loan origination fees and/or points. Do not pay them, you can do better; shop around for a better loan program.

 

  • What Are My Lifestyle Needs?

Make yourself a list of needs and wants. Things I must have, such as close to public transportation, access to area expressways, area restaurants, shopping, schools, etc.  I suggest you make a “test drive” from your new home to your place of employment during your normal commute time and back again.

 

  • What Are My Long Range Goals?

This question requires you to look into your crystal ball and foretell the future. If and when you start a family is this where you want to raise your children? Are the local schools the schools you would want your children to attend? If you will be starting a family does this house have the necessary bedrooms and space to start a family?  Will you be the caretaker of an elderly parent, what if they had to move in with your family, is there enough space.

The above questions are by no means all inclusive. Hopefully these questions have started you in the right direction and have pushed you along the road to successful home ownership.
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