Regardless of whether you are preparing to purchase your first home or you are thinking about downsizing or upgrading soon, you understandably are feeling the weight of this tremendous decision. While you can easily relocate to a new rental home frequently as needed, the prospect of selling and moving out of a home that you own is a different story. You need to make a smart, informed decision when selecting the right home to buy, and many factors should be analyzed before you finalize your plans. Before touring any homes, prepare for your upcoming home search by turning your attention to these points.
1. Your Future Plans
Homeowners may be able to make a quick sale when needed, but you should not count on this. It takes many homeowners months to sell their home in a good market, and there may be a time when you need or want to sell quickly when market conditions are poor. Essentially, you need to determine if your housing needs may change within the next few years. If so, renting may be a better option. Otherwise, consider home features that may accommodate your future housing needs. For example, you could purchase a larger home than you need right now if you plan to expand your family within the next few years.
2. Your Budget
When you purchase a new home, you will take on an adjusted housing payment. In addition, your cost of utilities and your commuting expense may change. Property taxes, homeowners’ insurance, home repairs and maintenance costs should also be factored into your budget. By analyzing all of these factors, you can more easily determine a maximum housing payment that you are comfortable making.
3. Your Available Cash
You will need cash to pay for closing costs and a down payment on a new home. If you are selling your existing home, proceeds from this sale may cover your down payment and closing costs. You should plan to retain the equivalent of at least three to four months of mortgage payments as a cash reserve. In addition to this reserve, consider including an additional lump sum of cash for your homeowners’ insurance deductible in the event of serious and unexpected property damage.
4. Your Credit Rating
When you have a reasonable monthly mortgage payment and a down payment figure in mind for your purchase, you can use an online calculator to estimate a comfortable home loan and sales price amount. Remember, however, that your interest rate will be linked directly to your credit rating. Before you spend time shopping for a new house, request a free copy of your credit report from all three bureaus. Ensure that you have good credit scores, or take steps now to improve your credit scores.
5. The Current Housing Market
When you have a ballpark sales price range in mind for your new home purchase, you need to analyze the current housing market. Determine if prices are currently rising or falling. Talk to a real estate agent about the preferred time to buy, sell or hold. In addition, review homes in desirable areas that are within your price range. This will show you how affordable the housing market is for your financial situation.
6. Housing Needs and Wants
Other important factors to consider before you seriously explore specific communities and homes are your needs and wants for a new house. How many bedrooms and bathrooms do you need? Do you need any extra features, such as a media room or a home office? Consider if you prefer all bedrooms on one floor or if you want the master bedroom removed from the other bedrooms.
You understandably may be eager to jump right in and start looking for a new home today. However, you can see that several important factors need to be analyzed thoroughly before you begin. Now is a great time to focus your attention on these factors and to decide if you should begin hunting for a new home soon.