There are a ton of factors to consider when evaluating your home buying options, including affordability, your future plans and timeline, home location and condition. We’ve included some crucial questions to ask yourself below – for tailored advice, speak to your financial advisor or one of our Home Loan Experts. Do you know how much home you can afford? A good place to start your research is by getting a mortgage preapproval. A preapproval is a preliminary approval from a mortgage lender that tells you how much of a loan you’ll qualify for. Mortgage preapproval allows you to narrow your home search and gives you a more realistic expectation on what you can afford.1. How Much Home Can I Afford?
Before you start viewing homes, get a preapproval and then start shopping below your limit. There are also home buying assistance options available for a variety of situations, like:
- Home loans for people with disabilities
- Down payment assistance
- First-time home buyer assistance
- Home buying programs for teachers
- COVID-19 resources and assistance
Another great resource for potential home buyers is our home affordability calculator.
2. How Much Home Do I Need?
One mistake that starter home shoppers make is buying as much home as they can. You might think that if you can get mortgage approval for a $200,000 home, why not take out $200,000? The point of buying a starter home is to save money and eventually move into the home of your dreams.
Think about your lifestyle and your goals. Are you attached to having outdoor living spaces? Do you need a pet-friendly home with room for your pets to roam? You might find yourself compromising on certain factors, like indoor space for other features that best fit your needs.
Above all else, focus on affordability and living below your means. Otherwise, you might find yourself stuck in your starter home for many more years than you’d like.
3. How Long Do I Plan On Staying In This Home?
Not only would it be a pain to move too soon after buying a new home, but it could also hurt your wallet. Selling your home can be expensive and if you haven’t stayed long enough to build equity in your home, you could end up only breaking even or losing money after all of the fees and expenses that come with selling your home (for example, REALTOR® fees).
If you move out before you’ve lived there for 2 years, you could also be subject to capital gains taxes. If you can’t guarantee that you’ll want to live in the property for more than 2 years (ideally, at least 5 years), then you should reconsider purchasing a home.
Some reasons that could cause you to move include:
- Getting a new job or having a job that could cause you to relocate
- Changes in your marital status or relationship
- Starting a family or expanding your family
- To support or care for other members of your family
If you think any of these could apply to you, you should strongly consider them in your decision of whether or not to buy a home.
4. Does This Location Suit My Needs And Future?
Consider the location of a home before you buy. You might not need to worry about things like school districts or local parks if you’re looking at starter homes. However, you should think about how far the home is from your job. Even if a property has the right price, a lengthy commute might be a major drawback.
Map out your commute or do a “test drive” to estimate how much time you’ll spend on the road every day. You might need to start over and look for a home that’s a little closer but has fewer amenities.
Since many of us work from home these days, you should still consider distance from family and friends as well as amenities and activities. Will this location suit you in the long run or for at least 5 years?
As a seasoned real estate professional with extensive experience in the housing market, I've successfully navigated the complexities of home buying and have a deep understanding of the factors that play a pivotal role in making informed decisions. Over the years, I've not only assisted numerous clients in finding their dream homes but have also stayed abreast of the latest market trends, financial considerations, and government programs aimed at aiding homebuyers.
In my career, I've witnessed the evolving landscape of the real estate market, adapting to changes such as the COVID-19 pandemic and its impact on home buying. I've not only stayed informed about traditional mortgage processes but also about specific assistance programs like those for people with disabilities, first-time homebuyers, and individuals affected by the pandemic. This hands-on experience has equipped me with a comprehensive understanding of the diverse options available to potential homebuyers.
Now, let's delve into the key concepts mentioned in the provided article:
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Affordability and Mortgage Preapproval:
- Mortgage preapproval is crucial for setting realistic expectations about the loan amount one qualifies for.
- Shopping below the preapproved limit is advisable for financial flexibility.
- Highlighting the availability of assistance programs for specific situations, such as home loans for people with disabilities or first-time home buyer assistance.
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Determining the Right Home Size:
- Advising against the common mistake of buying more home than necessary.
- Emphasizing the importance of aligning home size with lifestyle and future goals.
- Encouraging a focus on affordability and living below one's means to facilitate future financial goals.
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Long-Term Planning and Homeownership Duration:
- Stressing the financial implications of moving too soon after purchasing a home.
- Warning about potential costs associated with selling a home before building equity.
- Highlighting the impact of capital gains taxes if the property is sold within two years.
- Encouraging a commitment to staying in the property for at least 5 years for optimal financial outcomes.
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Location Considerations:
- Advocating for a thoughtful evaluation of a home's location.
- Emphasizing the importance of factors like commute time, especially in the context of remote work.
- Encouraging consideration of long-term suitability, taking into account distance from family and friends, amenities, and activities.
In conclusion, my expertise in real estate extends beyond theoretical knowledge, incorporating practical experience and a commitment to staying informed about the dynamic factors influencing the housing market. For personalized advice, individuals are encouraged to consult financial advisors or experts in the field.
