Are You Ready To Purchase Your First House?
It's the largest asset you will probably ever purchase, and it is easily the scariest purchase you will ever make... your first home!
I know that is exciting to think about, and there are all kinds of pressures to purchase a home which are only exacerbated by a white hot market in many places.
But first, let's slow down.
Here are some things to think about before jumping in.
Does it fit within your Financial Plan?
At Snowcap Financial we believe in the Financial Plan being the guide for all of your financial lives. If you have that plan in place, and are following the strategies laid out within it, then all financial decisions become a lot easier.
So, how do things look according to your plan?
Are you already hitting all of your savings goals and making sure you on track to financially fund your future?
Are you hitting you savings goals and building up an emergency fund (which you WILL need when you move into the house and you are responsible for all of your own repairs... more on that later.)?
You should have all of your "bad debt" like any credit cards paid off before thinking of buying a home. What else is in your plan for debt payoff? Student loans? Cars? Anything else. The less debt you have, the better prepared you will be for the all of the expenses of homeownership.
You really need to make sure that you have good credit before buying a home. Bad credit or negative things on your report could cause your loan to get denied altogether, or best case scenario cause you to have a higher mortgage rate.
A higher percentage rate on your mortgage can equal a drastically raise your monthly payment, and as a result add a frightening sum of money to the life of the loan.
The plan is there to make sure that, as long as you follow it, you know that ultimately will win with money.
If you let it guide you, then the decisions like whether to buy a house or not become a lot easier.
If you still aren't sure, then go over with your Financial Planner to get advice on what might be the best course of action for you and your family.
Renting is a strategy
Renting is not a bad thing at all.
Renting is a strategy.
When the housing market is as crazy as it is right now in 2021, renting may be the best strategy for you. Many rental homes right now are a relative bargain compared to the homes that are out there for purchase.
There are many buyers out there right now that are doing things in the buying process like making all cash offers, or getting into bidding wars, or - the worst of all - waiving inspections to try and win battle to spend hundreds of thousands of dollars on a new place to live. We can NEVER recommend waiving the inspection, you just never know what could be potentially wrong with a home, which we will cover in the next section.
If you feel overwhelmed by the process and current market, just wait. When the market does finally cool off, we probably won't see cheaper houses, they will probably still go up a little until they get to that point that things slow down. However, you may be able to avoid some of the buyer mistakes that we are seeing right now, and you will feel better about having made a smarter purchase then.
Don't discount the extra costs of owning a home
You've got that home now, which is great! Now you are responsible for EVERYTHING to ensure upkeep.
You didn't need a lawn mower at the apartment, but you will now.
Lightbulbs need changing? Buy a ladder.
More space, more rooms, more trashcans. Have you seen the price of decent looking trash cans? It's mind-blowing.
What if something breaks? There is no maintenance man to call to come fix it.
Water leak - you're on your own. Fridge dies - that's on you too.
Every thing you can think of that could go wrong with a house is a potential hit to your pocketbook.
That's why owning a home is much more expensive than renting in the short-term. There are many hidden costs. You buy the house and pay market rate on your mortgage, but all of the other expenses get added on top of it. Of course, over time, you keep paying the same mortgage while market rate for the house goes up as it appreciates, so it does balance out over time.
Don't let what you "should do" drive decision making
While purchasing a home is always a partly emotional decision, that's okay. It is called personal finance for a reason. But don't let what others or what you have heard you should do drive the decision. It is okay to wait until you know you are ready. You don't have to buy today.
When it is time to make an offer, you have to take the emotion out of it and ensure that you are making a good, calm, rational financial decision. This is where a good realtor should really help you and earn their commissions.
Of course, over the long term, it is much better to own a good home in an appreciating area than to rent, and I want you to do that, but you need to make sure the timing is right.
Need help figuring out if you're ready?
All written content on this site is for information purposes only. Opinions expressed herein are solely those of Snowcap Financial, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.
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