Understanding Home Finances

« Back to Home

Are You Ready To Take The Plunge?

Posted on

If you have been mulling over the prospect of buying a house, you should take a hard look at your situation to determine whether you are ready for the purchase. You can start the self-evaluation by answering these questions:

How Long Do You Plan To Live There?

Buying a house and then selling it soon after is expensive; in fact, you can easily make a loss that way. This may be the case even if you sell the house above its purchase price. This is the case because there are costs associated with buying a home (such as closing costs and shopping expenses) other than the actual purchase cost; there are also costs associated with selling real estate (such as advertisement costs, repair costs, and realtor fees). It is difficult to recoup such costs if you don't stay in the house for long. Therefore, you should only buy a house if you plan on owning it for many years.

Can You Afford the Ongoing Expenses?

Secondly, you need to confirm that you can afford the ongoing expenses of buying a home; it is not just about qualifying for the mortgage and having a down payment. You should be able to make the mortgage payments, maintain the property, pay for home insurance, and pay the utility bills. Don't make a purchase before projecting these costs and confirming that you can afford them for the foreseeable future.

Are Your Finances Secure?

Nobody wants to buy a home only to later lose it in a foreclosure. Unfortunately, that is what you are headed for if your finances aren't secure. Of course, you can't future-proof all your financial incomes, but you should at least make sure that you won't lose the house if you don't have a job for half a year or so. One way of doing this is to build an emergency fund that you can use if your regular sources of income, such as your day job, dry up.

Do You Know What You Want?

There are many types of homes in the market, and all of them have crucial pros and cons. There are apartments, condominiums (condos), single-family homes, and co-ops, among other things. You need to explore all these forms of homeownership to help you make an informed decision. For example, it would be bad to buy a single-family home only to realize that you don't like or can't maintain its compound. You don't have such a disappointment if you conduct your research and identify a condo or co-op as the best type of home for you.