Purchasing a home is one of the biggest decisions you will ever make in life. It can be exciting and fun to embark on the adventure of home ownership. It can also be a source of stress and worry if you aren’t quite ready to make such a huge investment. Here are four questions to ask yourself before buying a new home. *This post contains affiliate links.
There is a lot of jargon which is involved in the process of buying a house. It can be even more confusing when you start to hear terms like like fixed-rate mortgages, conveyancing, prorating taxes, escrow, and equity. You might not understand the descriptions of the types of properties for sale such as a single family dwelling, condo, co-operative, or HDB BTO. So, before you start contacting realtors or arranging viewings, it is important to familiarize yourself with these terms and to decide if buying home is really the right choice for you.
1. Where will you be one, five, or ten years from now?
Buying a house is going to be one of the biggest financial commitments which you make in your life. While it might be tempting to buy a house that fits your current needs simply because you don’t want to rent anymore, or you just want to be able to decorate your own home the way you want, you also need to think about your long-term plans. Determine how settled you are in your current job role. Is there job security or the possibility of a transfer in the future? Are marriage and kids on the horizon for you? These are all important factors to consider.
Maybe you are considering a move in a couple of years time. If you buy a home only to have to sell it again in the near future, you could end up throwing away a lot of money. While there is a lot of societal pressure to buy a home at a certain point in life, that doesn’t mean it’s the right decision for you. Sometimes renting really is the best choice.
2. What are the hidden costs of owning a home?
The purchase price of your home is only one of the myriad of expenses which you need to consider. Many first time home buyers are unaware of property taxes, mortgage insurance and general household repairs that can end up costing thousands of dollars unexpectedly. The benefit to renting is that it is the landlord’s responsibility to take care of the majority of these costs. Before purchasing a home, it can be helpful to use a rent vs. buy calculator so you can carefully compare costs.
If you are at the limit of what you can afford with the current mortgage deal that you are offered, you should seriously consider whether it is worth entering into an agreement or not. After all, if you were to unexpectedly lose your job or experience a sudden loss of income, you would end up putting yourself in a very difficult position financially.
3. Is the cheap “Fixer Upper” of your dreams actually a money pit in disguise?
If you stumble across that “perfect property” for super cheap that seems to just need a little TLC, it is easy to get seduced by the bottom dollar mortgage without closely considering all the expenses that can add up over time.
Even after the home is fixed up, there will be the expense of constant maintenance and upkeep. If you are planning to buy an older house, it is likely that you will have make some major renovations to make it safe to live in and that can turn out to be costly and time consuming.
4. Are you prepared to negotiate?
When you buy a house, it is expected that a certain degree of negotiation is going to be involved. Negotiating with sellers can save you a lot of money, but it takes more to negotiate a good deal than just making an offer under asking price.
You will need to do some homework to find out about similar properties in the area to be in a better position when it comes to negotiation. It is also worth looking into how long the property has been on the market. If it has been a number of months, you are more likely to find that your lower offer is accepted. You can also talk with a home inspector to find out if there will be any costly repairs that you can negotiate.
As a licensed realtor and homeowner, I am aware of the challenges that can come along with purchasing real estate. As much as I love the business of buying and selling old homes, sometimes buying a house is just not the right decision. If you are thinking of purchasing a new home, be sure to ask yourself the four important questions I shared here today before making a commitment to purchase.
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