Are you ready to look for a new home?
There are so many thoughts racing through your mind when you begin to think about a first home or a new home, upsizing or downsizing. Are you really ready?
Is the time right for you?
1. This is the hardest... if your financial house in order? If you are struggling to pay bills now, it is not the time to make a move. Do you have a down payment saved up? You need at least 10% in most cases, but you will still had to pay private mortgage insurance if your downpayment is less than 20%. Of course all of that has to take in account an emergency fund, college savings, retirement... and whatever else is on your plate right now or in your future.
2. Make sure you will be in this location for a period of time. You need to be committed in your job, school and life itself. By the time you buy a new home, perhaps invest in new appliances, furniture, rugs etc, you will have invested a large portion of money into moving in and making it feel like home. So moving anytime soon will result in a loss.
3. Is there an after-tax cost of owning? In the beginning only a small portion of your payment goes toward the principal. If you itemize your deductions, as many homeowners do, your mortgage interest and property taxes are deductible. Down the road, if you sell, you can realize up to $250,000 in profit (double if you are married) before you owe capital gains tax.
4. Watch out for hidden expenses. So many newer additions now have homeowner association fees. The is an additional levy by the local HOA to collect money to cover the infrastructure and amenities in your area. They can often add hundreds of dollars monthly to your budget. Many single family home owners will need to budget money and time for routine maintenance costs on the home, like painting, new roofs, new water heaters and more. That is why you need savings.
5. Be aware of current markets. It is really important to know what is happening in your area before you begin to look at a new home. Nationally, half of all renters are spending more than 30% of their income on housing. Seems like it might be better to own rather than rent. That is a huge benefit to owning. Locking in a mortgage at a low rate and not facing continual raises in rent.
Willy Rogers - Regional Manager Eastbank Mtg, a division of Geneva Financial, LLC "Integrity you can bank on!"