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10/1/07

Five Considerations Before Buying A House

The commonly stated motto for real estate is "location, location, location." However, when buying your first home, (absent already being wealthy) affordability is more important. I am not suggesting that you sacrifice yours and your family's safety or expectations by moving into a dangerous neighborhood, however, if you cannot afford an added luxury (for example, living on a golf course) you should not try to squeeze it into your budget.

(1) Purpose - Know why you are buying a home. If you are buying a home to live in, your standards should be different than if you are buying an investment property. If purchasing to live, you should like the "feel" of the home. You should feel comfortable there and like the floor plan. If purchasing for an investment, the only thing you should be concerned with is whether it needs a lot of work or will be hard to rent out (depending on your investment strategy).

(2) Location - As I stated above, you do not want to move into a dangerous neighborhood because the homes are extremely affordable, however, you should also not move to a rich neighborhood just because the neighborhood is "rich." Assess your situation and see what location is best for your. For example, if you have children, you might want to buy a home in a location that is zoned for a great school. Pick your location based on your situation and not on economic perception.

(3) Price - One of the main reasons that people lose their home is because they finance more home then they can afford. Stick within your price range! Biting off more than you can chew (as far as price is concerned) may work if the money crunch lasts only a couple of months. However, when you take a loan that normally spans 30 years (360 months), be aware that constantly struggling to pay your mortgage will take a huge toll on you.

(4) Mortgage Rate - Absent having the cash to buy a home outright, you will need to finance a home purchase. Due to this fact, many banks offer this option to customers. However, just because you have an account at a bank does not mean that you must use that bank for your mortgage. Look around; find the best rate and the best deal. Do not be committed to your bank just because you have your checking account there. Be committed to the bank that gives you the best interest rate and terms!

(5) Market - Although this may be out of your control, market condition should play a part in your decision. In a really "hot" market, you will be paying more than the worth of home when purchasing. During a "cold" market, you can find great deals and many times pay below fair market value. However, if you are buying a home to live in, your decision to buy should be based on your circumstance. If you can wait for the perfect market condition, than do so, but do not sacrifice your living condition just because the market is not "right."


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