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Buying your first home

Things to consider before becoming a homeowner

Purchasing a home is among the biggest financial decisions you’ll ever make.

After all, you’re talking about an expensive decision you’ll be living with for a long time – not to mention planting yourself in a specific location for the foreseeable future.

House hunting can be exciting, but before you go falling headlong for a cute little Cape Cod, you should consider all the angles. Here are some of the big ones.

Are you ready to put down roots?

Just because you’ve recently married or reached a certain age does not make home buying your automatic next step.

Think about what your life might look like for the next five to ten years. Is there a possibility you’ll change jobs? Be transferred? Have children?

There are a lot of things that might make it inconvenient to be tethered to a mortgage – or a specific location.

If you do need to move before you meet the four- or five-year mark, be prepared to potentially lose money.

It’s possible your house will not have appreciated enough in value to provide a profit once you factor in the realtor commissions and your selling costs. If it does appreciate in value and you sell it after owning it for less than two years, you may also be subject to additional taxes.

Can you afford a home?

It’s hard to believe, but a lot of folks out there are living without a budget. They see money left over in their accounts each month, but they don’t know the rate at which it is accumulating, or they don’t see any money left over and don’t know where the missing portions of their paycheck went.

Before you start deciding between two bedrooms or three, figure out your monthly income, expenses, debt payments and savings to know where you stand.

Even if a mortgage lender prequalifies you for a certain amount, it doesn’t mean you can actually afford a mortgage payment of that size.

Imagine how your spending habits may have to change with a mortgage. Will you need to scrimp to get by? Cut back or give up vacations?

Know where your comfort level is from a payment perspective – and don’t cross it.

Don’t forget the hidden costs of buying a house

Buying the house is just the first step. You’ll also have property taxes, utility bills, homeowner's insurance and maybe mortgage insurance, depending on how much money you put down.

In some neighborhoods, you might be part of a homeowner’s association and have to pay dues monthly, quarterly or annually.

You should also set aside roughly ten percent of the purchase price annually for maintenance and repairs, and be financially prepared for household emergencies – because you don't want to be wondering how to pay for a new water heater, furnace or other critical appliance when they reach the end of their life span.

Be sure you’re figuring in these extra costs when deciding if you can afford to buy.

Make sure your credit history is squeaky clean

Just like applying for a credit card, whether you qualify for a particular home loan depends on your financial history.

Lenders may look at pay stubs, employment forms, past and current tax returns, and your credit score to determine eligibility.

If you have any negative entries in your credit history, the lender may consider you too big a risk. You don’t want a loan rejection showing up on your credit report, so know what is on your report in advance and clean up any bad ratings by contacting the original creditor.

Consider working with a professional real estate agent

Agents typically specialize in a certain geographic area or neighborhood.

They’re familiar with neighborhood histories, recent comparable sales, which areas might be appreciating faster and other nuances outside agents may not know.

When you're considering making an offer on a property, agents can help you determine an offering price and negotiate for you with the seller or seller's agent.

Real estate professionals also know their way around the mounds of paperwork you’ll likely encounter. This expertise can be very important, especially when the home you’re buying is your first.


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You should consult your tax advisor regarding your own tax situation.

Financial professionals do not provide specific mortgage advice and this information should not be considered as such. You should always consult your mortgage professional regarding your own specific situation.

DOFU 10-2017