Home Buying Tips: Choosing Between Now And Forever
Guest Blogger: Suzie Wilson
When you’re setting out to buy your first home, you typically have two choices. These are to invest in a small property that you’ll live in for the next three to five years or dive head first into your “forever” family home. There are pros and cons to each and there are also many steps you can take to streamline the process, no matter which option you choose.
Today’s blog is brought to you by Duc Ong of Blueprint Real Estate Advisors.
Evaluate Your Budget
How much you can spend on a home is usually a good indication of which direction you can take. If you can only qualify for a $200,000 mortgage, for example, you probably can’t afford a half-a-million-dollar home with four bedrooms and an acre of land. Your budget will also depend on the type of mortgage that you can qualify for. When applying for home loans, lenders will take into account everything from your current income to how long you’ve been to your job to your credit score.
Understand Additional Costs
Another thing to consider when you’re looking at your budget is the actual cost of homeownership. According to LendingTree, your lender will look at your debt-to-income ratio. A DTI of less than 35% is a good indication that you can afford the additional costs of homeownership. These might include taxes, repairs and maintenance, and upgrades. Your expenses will also include insurance, which you will need to evaluate carefully. Keep in mind that homeowner insurance does not cover things like appliance breakdown; it exists to protect you against the financial impact of major structural damage, theft, and injuries. Consider looking into home warranty options, which are renewable contracts that can help you cover things insurance does not, such as appliances, your HVAC system, and your plumbing and electrical systems. When you're looking for the best home warranty company, make sure you’re selecting a policy that covers everything that matters to you and your family.
A Future Investment
While real estate is always an investment, when you’re deciding between a larger home and a more affordable one, you might also want to look at its future value. While there is no way to 100% guarantee that a home will increase in price, Corporate Finance Institute explains that most markets rise and fall with fair market value. If you’re moving to an up-and-coming area, you may find that buying a smaller home in an underdeveloped neighborhood may render a greater ROI than a larger home in an established area. If you’re not sure what to look for in an up-and-coming neighborhood, HomeBay says there are several things to watch out for, including frequent community events, new small businesses, and construction.
An Investment In Your Lifestyle
Although buying a smaller home has its benefits, there are also perks of going ahead and putting down roots. If you have or plan to have children within the next few years, they’ll have an opportunity to go through school with their friends from the neighborhood. A larger home will also give you more room to expand your family, which might even include multi-generational living if you have a parent or grandparent that needs care later down the road.
Whether you are choosing between a larger home to accommodate a family or a smaller home on a larger lot, you have many choices. Before you make your decision, identify your budget. You also need to understand the additional cost and ways to offset them (like buying a home warranty). You should also consider the potential future value as well as the perks and pitfalls of your current lifestyle in a smaller/larger home.
If you’re ready to start looking for your new home, Duc Ong can lend you a helping hand. Get in touch today by calling 808-278-0285 and setting up an appointment.
Image via Ward Village