Home buying tips – Curing the dilemma of first time home buyer
With the interest rates all time low, many people who haven’t bought a home are considering buying one. Recent housing bubble and record number of foreclosures are making people think twice before jumping on the home ownership band wagon. Being myself as first time home buyer, recently I have been to some open houses and visited some ‘for sale’ homes and got pretty good idea on different types of homes and their measurements in square feet and price ranges. Of course, the house prices I am referring to are subject to the area where I live. So the housing prices may vary, but these home buying tips are applicable every where.
Would be home owner dilemma
One of my friend suggested that I should buy house only if I am going to live in the house for at least five years. Wouldn’t it be nice if there is a way to know how your next five years going to be? I think everybody who is planning to buy a house go through the same dilemma. Many what ifs and fears surface in the mind with no specific answers. But the confidence, faith and the desire to own a home (and live in it) makes them move ahead with one of the biggest decisions they make in their life (it is more so, if you are first time home buyer).
If you are planning to buy a house and you are a first time home buyer, remember the following home buying tips:
There are no guarantees in life
I would love to have a guarantee for the things I buy so that I know the money I spent is well worth it. As much as we love to have guarantees, there are no guarantees in life. Tomorrow is not guaranteed. If we are outside, there is no guarantee that we reach home. It makes us humble to know that somebody else, more powerful than us is in control. Like any other financial investments, there are risks involved in home ownership. But with proper preparation, knowledge and mindset, we can take calculated risks and in some instances we can avoid them completely.
Buy an affordable home
I never seen anybody who doesn’t want to live in big home (whatever that means to each individual).
When you are planning to buy a home, you don’t want to buy a home with bigger monthly payments than what you can comfortably pay. I would rather choose a house with comfortable monthly payments than a big house which wows my friends and family but makes me sick with heavy monthly payments. Another friend of mine said, I want to buy a house with comfortable monthly payments so that I can enjoy life in every way like taking vacations, buying luxury cars etc. I couldn’t agree more. If you buy a bigger home than you can afford, you don’t have much money left over to enjoy after your fat monthly mortgage payment.
Keep it for long term
I know it is self explanatory, but unless you have to move out because of some critical situation, stay in the same house for at least seven or eight years. That way even though there is a down turn in housing market, it will turn around and head into booming housing market. Also you will build more equity on the house as you would make more payments on the loan.
Impressing others Vs impressing you
It is tempting to buy a bigger house and walk around one foot taller, especially around your friends and buddies. The truth is, once you calculate the interest you pay for the life of the loan, you will be rally depressed. If you have taken a loan for $700,000 at 5 percent interest rate for thirty years, by the time you paid off the mortgage, you would have paid nearly $1,352,790, which is almost double the amount of what you borrowed originally.
Prepare for the unexpected
Life is what happens to you while you're busy making other plans. This is a quote by John Lennon and it’s worth mentioning here. We want life to be everything we planned, but seldom happens so. If you can put away 3 to 6 months worth of mortgage payments aside, you will be in a better position to handle emergency situations.
When you are contemplating on whether to buy a home or not, gather all the facts and educate yourself about buying a home, mortgage (unless you are planning to pay the entire amount for the house by writing a check), interest rates, monthly payments etc. I was surprised to know that 1% increase in interest rate for $250,000 loan can add as much as $40000 to the total amount for 30 year mortgage. Choose a real estate agent who is knowledgeable and genuinely interested to help you. Ask questions and get answers and opinions from the people you trust, but what matters most is your gut feeling and intuition.