Buying a new home may seem intimidating at first because it requires you to make a long-term commitment that is not easy to get out of. Aside from the monthly mortgage payments which could run for several years, the property can also restrict your mobility. However, in most cases, the benefits of having a house under your own name can outweigh the disadvantages.
The most obvious advantage is the potential return on investment because houses appreciate in value over the years, especially if they are kept in good condition, and the location shows potential. The profit could be considerable if you decide to sell the property after some time. It can also become a source of passive income if you rent it out either on a long-term arrangement or as a vacation rental.
“You should choose your property wisely. It could end up as one of your most valuable assets with a satisfying return on investment,” says Greg Butler, a real estate agent in Woodinville, WA. This is evident since by just checking out any homes for sale, anyone can see that housing prices are increasing every year.
Aside from this, homeowners also feel an emotional satisfaction from their property. This is because the house serves as a physical representation of their hard work and efforts. Of course, despite these benefits, you need to think carefully before finally deciding to buy your own home in order to avoid getting burdened with a mortgage that is beyond your means or a property you no longer want. To see if you’re ready to buy your new home, check these signs:
1. You Are Financially Healthy
While thinking over your home purchase, you should first have an objective look at your financial capability. You should have a proper assessment of how much you can actually afford to pay monthly in mortgage, consistently for several years, without disrupting your normal lifestyle.
Aside from your savings, factor in your regular income plus your average monthly expenses, which should include current and potential debts. Property ownership is a long-term commitment, and there would be recurring expenditures such as real estate taxes, association dues, insurance fees, and property maintenance costs.
According to the Federal Housing Administration (FHA), a 43% debt-to-income ratio is the standard requirement for home loans, though some lenders may require a lower ratio. This ratio simply measures your earnings and compares it against your debts and expenditures in order to see if you can sustain the monthly payments without defaulting.
2. You Are Prepared For Emergencies
No matter how big your current savings and monthly income are, there is no guarantee that they will stay that way a few years down the line. From the time you acquire your new property until you complete your mortgage payments, many things can happen that could shake your financial stability. It could be in the form of a job loss, an economic crisis, or a spike in interest rates.
If you overextend your finances during the acquisition, you won’t have enough left to support yourself in case a problem arises. You could find yourself suddenly unable to continue with your monthly payments and end up forfeiting your property, thus losing out on your previous payments.
This is why you should leave enough wiggle room for yourself when you commit to any long-term financial commitment such as a home purchase. After releasing the down settling the payments and other fees for the property, there should be enough left over from your savings to tide you over any financial emergency. These savings should be enough to cover any mandatory expenditures and bills for several months while you look for new opportunities or other sources of income.
3. You Are Planning To Settle Down
As a homeowner, you will be tied to your community. It won’t be as easy to move around unlike if you are just renting. It will also affect both your lifestyle and career considerably, so you have to seriously think over the different aspects of your life before you proceed with buying a new home.
For example, your current workplace may be accessible from your home, but this may change a few years from now. Should you decide to leave the company, it won’t be as simple as just packing up your things and leaving. You have to wait until you can sell your house, rent it out to someone else, or limit your job search within the vicinity. Your neighborhood will also have a significant impact on your way of life. If you bought a property in the suburbs, you should be the type of person who is comfortable living in a more quiet and placid environment. Likewise, a home in the middle of a bustling city will expose you to different noises and disturbances in the middle of the night. If you can picture yourself staying in the same community for many years and feel satisfied about it, then you’re on the right track.