5 Things to Keep in Mind If You Plan to Buy a Home in 2016

Written by Posted On Tuesday, 29 December 2015 21:17

buying-home

Buying a house in top cities can become easier if the reported easing of credit standards come true in 2016. Cheaper and easier loans make it more compelling now than ever to get onto the homeownership bandwagon.

A home mortgage is a path taken by most to finance their purchase and if the financials are not worked out properly you may be left with massive debt.

If you are a first-time home buyer then there are many things that you need to keep in mind before making the buying decision. Proper understanding of your financial fundamentals will help you evaluate how big a house you can buy, know the mortgage you are eligible for and what you should put down for the purchase.

The cost of a house varies with location and amenities. If you choose to buy a house in an expensive locality then the mortgage balloons, and so does the size of the amount that you must pay upfront. If 20% of the cost of the house is paid down in full and you choose to buy in a pricey locality then the down payment can be almost as much as $200,000.

Here are a few tips to help you out with home-buying decision.

1. Be Sure of Your Stability

It makes no sense buying a home if you move to another city in a couple of years. Most millennials and young professionals travel as part of their job, and with increased globalization, there is no predicting where a promotion or job change will take you.

If you are not sure how long you will stick to a city it makes sense to rent than to buy. You will be saved of the headaches of homeownership as well as get to enjoy the freedom of not having your roots too deep down.

Also, remember that many a time we move cities due to unforeseen circumstances. You may tire out the neighborhood, aspire for a different lifestyle, want to stay closer to an ailing family member or prefer to put your kid in a school across the country. Whatever the reason, not having a nest of your own will make it easy to just pack your bags and bid adieu to your current city.

So if you are sure that you will stay put for at least five years, you can seriously consider buying a home.

2. A Home Is Not an Investment

Financial advisors do recommend real estate as an investment, but they become so only when they are solely bought for the purpose of flipping or for renting. If you intend to stay in the house you purchase it is definitely better to stop looking at it as an investment vehicle where you park money for a few years to clock neat returns.

You will be robbed of the joy of living in a place you call your own if you constantly worry about the dip and peak in real estate prices. 

Financial planning experts suggest that you look upon house-buying as more of an emotional and personal decision than an economical one.  It will also ease the burden of making a ‘money-smart’ decision and will help you focus on aspects that will play a major role in determining how happy you will be in what is to be your home for the next decade or so.

Think of your home as an investment you are making to build memories, share family experiences, provide safety and security to children, and probably bequeath to your loved ones when you no longer need it. A home is definitely an investment in building something valuable, but it is not necessarily wealth as we define it.

3. Don't Fall into the Debt Trap

Young couples often decide to buy a house because the logic is if we are paying $2000 in rent why not use it towards paying off the mortgage while building home equity.

But the fact is that to get a home with the amenities of your current place you will have to take out a huge loan which will result in a much bigger monthly payout. Also in the case of young working couples, owned house will curtail the freedom that renting will provide, often making it difficult to pull out roots and relocate. Ensure that you are ready for financial responsibility, aside from your student loans which you are probably still trying to pay off.

Decide beforehand how much you can invest in buying a home and never look at homes that are priced beyond your budget. Pricier homes may have improved facilities and better looks, and it is very easy to unwittingly push your budget a bit further to accommodate what you newly appreciate.

Though not venturing beyond your budget is the way to go, there are some instances where you can make exceptions. Sometimes you may get a super-deal in one of the sought-after localities, but it will result in expanding your mortgage by several thousand dollars. Evaluate the benefits of going ahead carefully. If a salary hike or a promotion or two will make the mortgage affordable, then you probably should consider buying. 

4. Make a Big down Payment

A handsome down payment will make you more credit-worthy in the eyes of the lender and get you better interest rates. A bigger down payment will also help you earn more over the years on your house because your loan amount is smaller. So when you sell a few years down the line you get more bang for your invested buck.

Go all out when putting money down for a home purchase. Leverage your personal investments and liquidate fixed assets including your gold and silver jewelry. Reputed gold merchants will be able to give you a good price on your baubles and provide an easy and quick way to access cash.

With lenders easing on home loans, a good down payment will help you make full use of the great opportunities that 2016 presents to the home buyer. 

5. Make House Hunt Fun

It is very easy to get bogged down by house hunting duties to have all the fun sucked out of the process. Do not let this happen to you.

Take along a friend whose opinion you can trust and with whom you will be able to pull through days of open houses and buyer meetings. If you and your spouse are on the job, then make sure that you catch a cup of coffee in the new locality or enjoy a meal in a local restaurant to understand of the vibe of the area where you are scouting for home. 

Ensure that you do not hurry and do take your time to make up your mind. The more sorted you are about your purchase the easier it will be to carry out the elaborate paperwork and other responsibilities that come with a vetted buying process.

Conclusion

Buying a home is not an easy decision to make and you may take a while making up your mind. But you to have to soldier through because a good buy is worth all the trouble. Hope you make use of the positive cheer that lenders seek to provide home buyers this New Year, and invest in a place that you can be proud of and enjoy living in.

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