Typically, a home purchase is the largest investment in most people’s lives. In the US, on average 40% of homeowners have their wealth associated with their home.
Here are some guidelines to keep in mind as you move forward in purchasing.
Think Long Term Purchase
You will likely be in your home at least for 5 years, with the average being 10 years, before homeowners make a move. Buy a home that will continue to offer you what you need for your needs for the next 5-10 years.
Don’t speculate with Money, Buy to Improve Your Life
The housing market has become too unpredictable. And you will be spending the majority of your time in your home; enjoy being where you live. Focus on what will help you enjoy your life.
Don’t Buy Into Trends, Buy Into What You Need
Shiny features are meant to lure you into paying more and paying for what you don’t need. Don’t be fooled. Focus on the essentials and what’s important to you.
Determine Your Budget and Stick to It
Setting a budget is the first thing you need to focus on. It’s very easy to go over budget and suffer the monthly burden you will have to carry. This is particularly true for urban buyers. Typically 42% of buyers go over their budget compared to Rural Buyers.
20% is an Ideal Down, but Consider Lower or A Lower Priced Home if Cumbersome
Here are the reasons why 20% is ideal:
- If less than 20%, then you will likely pay for Private Mortgage Insurance (PMI)
- Buyers with more down typically put more offers and buy faster
- Higher down reduces financial risk
Keep a 6-month Reserve
Thing happen. It’s best to be prepared and keep your peace of mind.
Get Pre-Approved & Consider 15-30 Year Fixed Rate Mortgage
The Preapproval is an indicator of how much you can afford and what your monthly will be. The 30 year fixed mortgage offers you advantages, the biggest being locking in your interest rate. They typically require higher monthly payments, compared to other mortgages, but you won’t have a balloon payment and the longer you make the payment, the more will be applied toward the principle.
Shop Around for a Mortgage to Get the Best Deal
Get quotes from different lenders. Each may offer their own incentives. Even by saving $40-$50 per month, think of the impact that will have over 15 to 30 years.
Spend No More than 1/3 of Your After Tax Income on Housing
Don’t spend too much. The monthly headache will not be worth it.
Always be Willing to Walk Away
A home purchase is an emotional one. But be wise, don’t just use emotions to justify the purchase. Those emotions dissipate. Buy for the long run. Be prepared to walk away if the seller does not meet your expectations. You will want to be happy 10 years from now, not just 10 weeks.
Be Wise. Use more than just your emotions. Think long-term. Build value, but imagine being in your home for a long time. Call Tarek & Associates and let us find you your next home. +1.949.337.8808