Before you begin scrolling through rental listings and set your sights on that perfect home, set a budget. Buying a home is a long-term commitment, and it’s important to think in longevity. While you may be able to afford a certain payment now, is this a realistic expectation 5, 10, or 15 years down the road? Let this proactive thinking help you determine a realistic budget for your home.
Financial advisor Kelly Long specializes in helping homeowners purchase homes that they can realistically afford. As a money coach, she recommends that your monthly mortgage payment should not exceed more than 28% of your gross income. She advises potential homebuyers, “if you buy [a house] for more than you can afford, you’ll end up hating the house and yourself in the long run.”
To help avoid future financial difficulties as a homeowner, set yourself up for success by researching the local real estate market. Is the average home sale price exceeding its list price? Falling short? If homes are selling for well over list prices, you may need to set your budget lower than initially anticipated. Be aware of sale prices, not just list prices, as you set a budget to help you select the perfect home.
Do Your Research
Once you’ve set a realistic budget for your home hunt, start thinking about where you’d like to search for a house. Are certain neighborhoods outside of your price range? Are other neighborhoods too far from your work for you to commute? The area surrounding your home can just as easily impact your quality of life as the physical home as well. So do your research!
To help you narrow down a list of areas and neighborhoods you’d like to live in, start by making a list of things you value. How important is walkability? Are school district boundaries a primary concern?
We recommend that you consider factors including neighborhood amenities, crime rates, schools, and ease of commute. Once you’ve decided deal breakers, necessities, and wish list items, go online to research where you should focus your house hunt.
Get Your Money in Order
So what else do you need to do in order to expedite and aid a smooth buying process? Regardless of whether you’ve found the house, or if your bid has been accepted, it is important to have your money ready. As the buying process can often be chaotic and competitive, it’s key to ensure you’ve set aside necessary information and funds that you’ll need in the window of time following your purchase.
Common monetary asks include an inspection and a deposit of earnest money. In the purchase contract, you may be asked to provide a deposit (this can range from 1% to 5% of the home’s total purchase price). It’s important that you consider these costs outside of your initial “percent down” payment to be fully prepared for buying a home.
Persevere Through the Entire Process
Once you’ve found a house, put in an offer, and been accepted, one of the worst things you can do is rush the process out of excitement to secure the home as your own. With many hot markets, many buyers are waiving the inspection process to expedite offer approvals.
One word: don’t! Being aware of the homes foundation defects could lead to unforeseen consequences and costs in your future, waiving an appraisal contingency could be a deal breaker. So play smart. Make sure your offer is well informed to set you up for success as a new homeowner.
Getting to the finish line and buying a special home can be trying, but with some research and a little patience, you’ll be well on your way to finding the perfect place to call home.