Buying a home is part of the American dream, and it’s also probably one of the biggest financial decisions you’ll ever make. Choosing your dream home is a financial decision as well as a personal one. In order to make the right choice, you need to do the numbers and research the local market and properties as well as take into account your personal preferences. 

Finding that sweet spot that balances your budget, property features, and what’s available can take time, research, and careful reflection. These five key considerations can help you get started on your journey to finding the ideal property.

1. The cost

Cost is probably the most important consideration when you’re buying a home. It isn’t only a matter of working out your down payment and mortgage repayments but also about understanding hidden and ongoing costs. 

Understand the illiquidity of property and know it’s probably going to be more expensive than you expected. 63% of millennials have buyer’s remorse, partly due to the hidden costs of ownership. So before you buy, plan for all costs, including upkeep, repairs, insurance, property taxes, and closing costs. 

2. How long you’ll be staying

Equally important is how long you plan to live in your new home and how your household might change in the coming years. What’s your current life stage and what changes are you likely to be making in the next three, five, and 10 years? 

It might take four to seven years on average to break even on a home purchase, for sufficient time for the property to appreciate in value and recoup your purchase and ownership costs. So for example, if you’re a young couple seeking the perfect starter home, could it be cheaper to rent for a few years? 

3. Location

When you buy a home, you’re not only buying the house but you’re also buying into the local area. Location affects lifestyle, commute times, and the amenities you have access to, including schools and parks. Understanding the location also gives you a realistic idea of property prices and how much the property could appreciate. 

So research the area you’re buying in, including the suburb, neighborhood, and street and surrounding areas. Location can also impact things like climate and safety. Is the area prone to flooding, temperature extremes, and other natural disasters? 

4. Needs vs wants

Working out what’s essential and what’s desirable so you have a level of flexibility to work within your budget. Just because a property doesn’t have every ideal feature doesn’t mean you should rule it out, and a property that requires some work could turn out to be a smart buy. 

According to Roy Dekel, CEO of Setschedule, “When shopping for your home it’s important to know what things are important to you, what things you can give up and what things you are willing to do or change in the near future. Your budget will likely help determine your flexibility in need vs want. According to the budget maybe new floors or paint can be something you can modify, maybe you can even see an addition in the future, these are a few things that you can add to the want column. While location to schools,  jobs, or transportation may remain a need as these are things that you will be unable to change without moving jobs, schools or properties."

For example, ugly decor, poor lighting, and dated fixtures can be easily rectified. On the other hand, do you need a fourth bedroom? Figure out your needs versus wants and you’ll more likely to end up with a property and a price that you’re happy with.

5. Home insurance

As a homeowner, your insurance policy can offer financial security and preserve the value of your most important asset. The two key issues for home insurance is how much you’ll pay in premiums and what the policy covers. 

Will your policy cover perils like tornadoes, hurricanes, storms, rain, wind, fires, flooding, and mudslides? Does it cover structural repairs, possessions, and landscaping? Also consider premiums, which are usually based on replacement cost, deductible, pets, and other factors.  

In summary

When it comes down to it, you’ll probably be compromising on a few things when buying a home. However, the important thing is to be happy with your purchase for the period of time you intend to live there. This starts with identifying the most important things for you and getting a realistic picture of all the costs before you buy. 

Once you start looking at actual properties, it becomes a process of elimination until you find the best property. Beyond giving you and your family a place to live, your house purchase could be one of the smartest financial decisions you make.