If you have never bought a house before, or you are considering moving up in house size and price, there are several factors that you will need to take into consideration. It is important that as you take this important financial step that you do not overextend yourself, and end up in a negative situation. Here are five things you should consider.
1) The bank will be willing to loan you more than you can really afford. Most experts feel that housing should not take up more than twenty five percent of your budget. If you make $2000.00 a month that is $500.00. If you make $4000.00 a month that is $1000.00. If you stick to this number you should be able to afford the other expenses that life throws at you.
2) You need to consider the size of the home that you buy. You do not want to buy a home that you will outgrow in the next two or three years. At the same time, you do not need to buy a home that is so big that you rattle around in it. It is a good idea to find a home that you would be comfortable spending at least the next ten years of your life in. If you really want a home, but money is tight, it is important to remember that not every child needs his own bedroom.
3) When you are planning your future budget, you need to take into consideration the extra costs associated with home ownership. If you have been renting you may not have had to pay water and garbage. If you are buying a larger home, your utilities may increase as well. It is also important to consider the extra expenses of taxes and homeowner’s insurance. Once you own your own home, it is important to remember that you are responsible for all repairs and maintenance. You will need to establish a sinking fund to cover these expenses.
4) Another thing you may want to consider is the housing market in your area. If you live in a depressed area, you need to realize that if you ever do need to sell the home, it may be more difficult. If you are considering a town home or a condo, you need to consider how easy they are to resell in the future. If you are purchasing a home in a hot market you should be careful to not pay too much for your home, because the bubble may burst.
5) Before you purchase your new home, you need to consider how stable your job is. This includes the possibilities of transfers and layoffs. Generally you need to be able to plan on living in a home for at least five years to make it worth purchasing. If you know that you will likely be moving to a new area in a year or two, save up extra money for a better down payment for when you do settle down.