Home ownership is part of the American dream — we long for a white picket fence and a patch of grass to call our own. Yet, there are a lot of factors to consider when making this dream a reality. The next time you ask yourself, Should I buy a home? think about these key factors before you make a decision.
Where do you see yourself?
Before you make any decisions, you need to assess where you want to live and consider factors like schools, property taxes, home type and commute. Look into the average rent and home prices that fit your size needs and specs within the specific area. Is the neighborhood developing and what is the chance your home will appreciate?
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Keep in mind that renting allows you the flexibility to switch neighborhoods or cities whenever you want. If you buy a home you are committed to a location so be sure you have good job security in the city and like the area. Plus, renting for a year is a good way to test a neighborhood. Also remember, the longer you stay in a purchased home, the more you offset your closing and moving costs.
Can you afford to buy a home?
Think hard about your financial goals and how purchasing a home will impact your savings and retirement targets. If you are buying a home as an investment, you need to be realistic that you can’t expect a financial gain. You never know where the market will be when you want to sell.
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While it is difficult to secure a mortgage, rates are down so it is a good time to buy if you can afford it. You will be assessed on your credit score, income and down payment so take your time to build your credit score up or save more for a down payment before you buy.
Remember that comparing rent and ownership costs is not as simple as seeing if your monthly rent would equal your monthly mortgage payments. In addition to your mortgage you also need to factor in taxes, repairs, maintenance, closing and legal fees, insurance, furnishing the home and moving costs. You shouldn’t spend any more than 28 percent of your monthly income on your mortgage payments, interest, taxes and home-owners insurance, according to Bankrate.com.
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Do the responsibilities of home ownership balance the benefits?
There is a lot of responsibility that comes with owning a home. Unlike when you are renting, if something breaks you need to pay to fix it. You also need to take care of ongoing indoor and outdoor maintenance.
The upside is that if you invest in updating your home, you are increasing the resale value and can make changes to suit your exact needs and taste. You can finally say goodbye to the white walls of your rental apartment. Also, don’t forget to consider the benefits of home ownership tax breaks.
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