BUY A HOUSE FOR THE RIGHT REASONS
The first question you have to ask yourself before purchasing a new home is do I want to be a home owner? It really doesn’t matter what your parents or friends think or your financial advisor suggests. If you aren’t ready, you aren’t ready.
Here are some things to consider before buying a house.
You plan to stay put at least three years, hopefully a lot more. In a typical buyers market, it should take about three to six years for a home to appreciate enough to off-set the costs of selling and moving. If the market is particularly hot, one that might be ripe for a price drop—your desired time frame might be even longer, since it could take many years for prices to recover.
You are mentally prepared. Renting a home is a little like dating, owning your own home is more like marriage, and not everyone is cut out for marriage. Even if you can fix everything that breaks yourself, you’ll still on occasion need to call a professional to fix or repair something that breaks.
You will need to have extra cash available. Most new homeowners are suprised by how much it actually costs to maintain a home. Interior decorations are expensive and most first-time homeowners don`t have a lot of furniture to work with. Outside work will require a lawnmower, maybe a snowblower, rakes, shovels, etc. If you drain all your savings buying the house you can find that you are going deeper and deeper into debt. It is highly recommended to have at least two months’ worth of mortgage payments in the bank and preferably much more.
You manage your money very well. Create a budget plan that includes expenses, savings, payments for mortgages and life insurance. If you can try to resist the temptation to drain your wealth with home equity loans and lines of credit. If you’re carrying credit card debt now, and you’re not quite sure what’s happening to all the money you make, put off your house search and clean up your financial house first.
Many American families get caught in the cycle of trading equity in their home just to pay off consumer debt and are highly leveraged with home equity lines of credit and interest-only loans. Many of these situations are bad and the families would be just as well off if they rented.