The American Dream of owning your own home is alive and well. What’s changed over the years is the wealth of options we have to own our own places. Sometimes all that information and all those choices seems like too much! Here are some tips to help you think about what’s involved in owning your first home.
While no one can see into the future, many people do have plans for the next five years. Is this home purchase the first of many, or do you want to settle in and put down some roots? If you fall strongly on one side of the equation or the other, leave yourself some options if plans change. If you want to buy a forever place, put down roots and forge deep connections to a community, go for it–but give yourself a backup plan. Make sure you can sell and move on if that’s what’s in the cards. If you want to move up to bigger and better over the years, make sure you like this first place well enough that you’ll be happy if you’re still there in five years.
Do an honest assessment of how much you like to putter with power tools and paint before you buy a place that needs a lot of DIY time. Knowing how to do repairs and renovation is not the same thing as loving it–and for a big job, or a complicated one, you need to love it or you’ll end up hating it. Factor in how much you can do yourself, how much you need a pro to do and the likely cost, or if you would really rather buy a place that is already buffed and shined. The amount of work a house needs, and the cost-planning for the repairs, can be part of the offer you make for the house.
Are you going to sleep there or really live there? Consider the neighborhood. Can you walk around and talk to people, shop in local stores, use public parks and get to know the neighborhood dogs? If you are hoping for community with your new home, spend some time in the neighborhood. Make sure it’s a good fit for you. Living in a home that is part of a community you love is a completely different experience to living in a home that has easy freeway access and a quick commute to work, and no community at all.
The trend toward minimalism, tiny houses, less is more, is probably here to stay. But if you start out feeling cramped, that feeling will probably get worse over time. You can go small, but make sure you have the space you absolutely need. A studio is doable for two people, but maybe having a door you can close on occasion would be a good idea–a one bedroom will not be that much more, but the extra bit of space may make a difference in how comfortable you’ll be. If you’re going to need to buy new furniture to fit a new place, consider the costs when you’re running the numbers.
Big furniture and too much stuff can make a roomy one bedroom feel like an obstacle course. You don’t want to trip over an ottoman every time you head to the bathroom. Less is more is a philosophy that could apply to the furniture and athletic gear, kitchen appliances and clothing, as well as the size of the house. Think about your stuff, and if you are willing to clear it out and pare down in order to fit into a small space.
How much outdoor space do you need? Do you need a yard, or will you have access to public parks and greenways? In many urban areas, planners are focusing on increasing green spaces and walkability of neighborhoods. That being said, many people need at least a small place to park a chair in the sunshine. If you like the outdoors and are going to live in the city, think about a balcony or patio for a Saturday morning sun-nap, and map out the local public greenways.
Is your financial house in order? While interest rates do make a significant difference in the decision to move ahead with a home purchase, they are not the only financial issue that can affect the long term success of your home buying venture. When you take a look at your financial picture, consider if there are any issues that will impact your ability to qualify for a mortgage. High-interest credit card debt and outstanding student loans are issues that will impact your financial health and credit score. Many people consider having an emergency savings account before saving for a down payment is a wise financial move. Consider having a financial planner take a look at your finances and make recommendations on how you can maximize your financial health.
Run the numbers. Closing costs and various fees can increase the out of pocket money due at closing significantly. Taxes are not static, and it’s smart to know what the real estate taxes have been doing in the community for the past several years. Plans are being discussed to change the federal income tax deduction for real estate. Tax breaks for renewable energy and historical preservation may change by the fiscal year. Utility costs tend to be higher in homes than smaller apartments, and may need to be factored into monthly cash flow. Transportation and commuter costs may change with a move. Your real estate professional can discuss how to run the numbers for your planned first home.
Use the resources of professionals. Real estate agents, financial planners, mortgage brokers, attorneys and accountants all have unique perspectives and a depth of knowledge and experience that is available to you. Everyone working within the system wants you to succeed in buying your first home. Their expertise can help you avoid problems and make the experience a positive one.
A home inspector is another expert who can give critical information you need to make a smart home-buying decision. Even your dream house needs to have a complete physical. If your home is not healthy and strong, you may end up with expensive and unexpected remediation of health hazards such as lead paint or asbestos, or with systems failure and the need for replacement. If a home inspector finds health, systems, or structural problems that will need remediation sooner rather than later, that information will go into the offer you make for the house.
If you’re happy renting, don’t feel pressured by other people’s expectations of what you should be doing, or the course your life should take. There is no rule that says you have to buy a house by 30. Buying a home is a big commitment in time and money. You’ll put your heart into a home, and you should only consider buying when you want to own a home of your own. Take the time you need to do other things. You may have other goals, and want to climb Mount Kilimanjaro or get a graduate degree or spend a year in Italy. Your goals and your life — buying a home is only one part of that bigger life.
For more tips for first-time home buyers, please contact me.