There are pros and cons to every major decision in life, and buying a house is a rather significant one. One may feel the urge to take that next step, to come full circle in adulthood and have a possession that relays success, stability, and grounding. Subsequently, you may make this decision under the assumption that it’s what you’re supposed to do or merely because you can. Being the later of the two, home ownership brought on feelings of empowerment and maturity, personally longing more for the experience over the possession of four walls and a walk-in closet. Make the choice to purchase if the timing is right, the commitment is there, and excitement for buying a home outlasts the mortgage application process. House hunting and purchasing is a tough sport, quite taxing on the faint of heart.
The choice is ultimately left up to the individual, however uncertain or fearless one may be. Logic needs to be sorted out to make the best decision possible. Financial stability and choosing a fitting property are key to your short-term and long-term goals. Please consider the below:
1) Create a tentative 5-year projection including personal, professional, and geographical aspects of your life: Are you single, married, have kids or pets? Consider what type of property best suites you considering house size, amenities, and location. Where do you see yourself working? Is your job stable and is there potential for relocation where renting make more sense?
2) Renting vs. Owning: Paying rent can seem like a waste of money, especially when a mortgage can be less expensive than apartment fees combined. Gaining equity is a smart practice and can result in zero monthly mortgage expenses (aside from annual taxes) once paid off. However, it is important to note the closing cost fees when buying or selling a house. Percentages of the total sale value are paid to realtors, there are appraisal fees, titles, and much more paid up front, where a bit of cash is needed in addition to the down payment for the property. If you buy and sell the same property in a short amount of time, it makes it difficult to recoup those costs even considering the equity you’ve gained. I’m guilty of this, but sometimes it makes more sense to sell rather than attempt to rent when moving to a different state. It’s a good idea to research the average cost for monthly rent in the area, if that may be a better option over selling. Please keep reselling in mind when purchasing. Two bathrooms are better than one and a loft isn’t technically considered a second bedroom to some. Consider the buyer market for the neighborhood and if your home attracts families or is only large enough to accommodate one or two individuals.
For the positive side of renting, think about how much maintenance you want to avoid. Do you travel for work or vacation or are you a homebody that prefers to tinker in the garage, garden, or kitchen? Do you live in the Midwest where chipping ice off your driveway to avoid ice skating is required or do you live in a dry climate where sprinklers are needed to prevent your grass from becoming crispy? City laws require snow removal demanding muscle or money and water drop coins collect on your monthly bills during a drought. Apartments often have fees included in the total rental bill, stabilizing your monthly expenses. When owning a home, expenses will always be more than you think. A storm can knock down your tree into your neighbor’s fence or your water heater may provide one hot shower a day. Appliances can be on the verge of breaking down at any time, or you may be obsessed with perfection, always improving your property little by little.
3) Have your finances in order: If on a government program for student loans, know how that can affect the mortgage process where the amount of loans can reduce the amount of money the lender will offer you. That amount of money depends on your monthly payments. It is beneficial to minimize or eliminate bad debt, aka credit cards and high interest non-federal loans. Consolidating your loans is a great option to improve your chances for eligibility. Also as a tip, avoid private lenders who can sometimes charge higher interest rates.
4) Increase your chances of obtaining your dream home or apartment: Choosing the right realtor is critical when considering home buying, you must be comfortable with and trust them. Realtors can be hired as your agent, keeping your best interests in mind. They need to be aware of other realtors showing the properties and potential offers on the table. Choose someone that is savvy and swift. It is easy to lose a home if there are multiple offers and if you are outbid. Presently, some cities have ridiculous markets where properties move fast and buyers often overbid to ensure success.
Something that B4’s Kate brought to my attention is writing a personal letter to the seller. (Click on the article for inspiraton and ideas: The Letter That Saved $11,000. Really.) This small gesture can influence the seller’s decision when parting ways with their beloved home full of memories and history. Sharing personal facts as to why you love the home can create loyalty far stronger than a generous bid.
Next, have a list of top requirements for your new residence. It will save time to have a solid idea of what you want, also keeping in mind that you’re not likely to find the complete checklist. Scheduling and touring homes takes time, so doing your research online is important. Also, using Google Earth is quite handy to see what once was on the property that might no longer be there (as an example, that big pile of dirt may be explained by the Google Earth photo of a gazebo from years prior).
5) Stress Management- here are a few things that a first-time home-buyer might come across: It is possible for the home appraisal to be valued at less than your accepted offer price. If this happens, your mortgage lender will not increase your loan approval amount, it will have to come from you the buyer in cash. However, if you counter offer for the appraisal price and the seller accepts, problem solved! Next, your mortgage lender needs to be monitored closely. They’ll assume you’ve done this before and are capable of near misses with due dates if paperwork is not received on time. Just because you choose a well-known lender, that doesn’t guarantee that they’ve got it together. Lastly, closing dates can be pushed back if paperwork is not complete, so that’s important to plan for.
When weighing your options, please remember that a mortgage is a bit more responsibility than a lease. An apartment can always be sublet, a lease terminated, or a clause added for rental protection. On the other hand, a home can be resold after owning for less than two years, or even turned into a rental property. Nothing has to remain permanent, but removing oneself from a rental contract generally provides a quicker turn-around than selling. Consider your plans for the purchased property both short-term and long-term. Searching for that perfect rental or property purchase can be stressful, yet equally rewarding. Ponder on your priorities in life and what makes you happy. Do you long for a home to call your own to build your foundation or do you prefer a rented apartment with the ability to travel on a whim? As a former home owner, and Kate as a new home owner, we hope that our experiences encourage you to make the best personal decision with the smoothest results. Follow your intuition, you’ll know what to do.