For the majority of people, buying a house is the largest purchase they will make in their entire life, one that they will be paying on for generally decades. If you spend too much in a house it has the possibility to leave you with too little dollars for goals you might have in your life, like college funds for the kids, retirement, or vacation.
Before you start to hunt for a house you need to decide whether it is better for you to rent or buy – you need to decide what is best for your situation.
If you are a renter, remember that over time your rent is going to go up. Renters generally like to rent if they like to move often or don’t like being tied down to one place. Renters also don’ generally pay for the lawn care, maintenance, or repairs to the home. They do not have to put sweat equity into their rental home.
If you purchase then you know that you have made a commitment for years to come to fix anything that breaks in the house, pay for any major repairs, and manicure the lawn. Renting makes sense if your plan is to live somewhere for a shorter period of time, since costs related with buying a home, like taxes, closing costs, and escrow fee, will take awhile to amortize.
If your plan is to stay in a place for a longer period of time, then purchasing a house is the best way to go in most situations. However, this equation can change with employment trends, the value of homes in your area, etc. While markets can fluctuate over long periods of time you are still likely to make money. And as we see with the 2007/2008 real estate market, it can be a bumpy ride.
If you decide that home ownership is the right choice for you, the next step will be to determine what you can afford to spend on a house. The majority of lenders suggest that you should spend no more than 28 percent of your monthly income on a mortgage.
Remember, that in addition to your mortgage costs, you will have legal fees and closing costs, which are typically 2 percent to 3 percent of the house price. In addition, you will have moving fees and labor, and any repairs you could have to make to the house once you move in. If you’re moving into a condo you also have your monthly maintenance fees.
When you have determined your price range, figure out what’s important to you such as location, and then have a look at what’s on the market. Research crime statistics, school districts, impending construction, and/or what might decrease/increase your home’s value. Have a look at the surrounding area to see if this place is what you want for you and your family.
When you have chosen a home that you want to put an offer in on, do not assume the selling cost is the actual cost of the house. It’s true that real estate agents use “comps” (comparable houses) as a way to price a house, think about what it might cost to buy and build a house on a piece of property in that same area. If you want a detailed assessment, you should hire an appraiser. You can search for an appraiser by zip code online at AppraisalInstitute.org.
If you have the cash to buy and to keep up with the upkeep, then why not buy a home. This investment will grow over time.