Becoming a homeowner is a serious choice that you should take the time to consider. Before you choose to purchase a home, here are 5 pieces of advice you need to know.
1. You can always negotiate a contract.
When you purchase a home, it’s a bit different than going into the store to buy, say, an appliance for that home. The sticker price isn’t always what it sells for.
Once you start the process of buying a house, you’ll see that there are lots of papers that need to be signed—these are all contracts. And contracts can always be negotiated. Take your time to read through these papers and challenge anything you don’t like (or hire someone else to do it for you).
2. You shouldn’t buy a home for your current lifestyle.
When you purchase a home, the chances are that you’ll be there for a while. Instead of purchasing something that suits you now, consider what kind of home will suit you long-term. Do you need space to accommodate a growing family? Or a place to set up a work-from-home office or studio?
Depending on the circumstances, your home won’t be a serious investment for at least 5-7 years. So, ensure that your house can be your home for that long, at least.
3. Know what you can afford—and stay within your budget.
A mortgage company will likely claim that you can afford much more than you really can—if you want to pay that mortgage back in a timely and realistic manner. The best advice is to only spend 28-33% of your gross income on your mortgage.
The less you spend, the better off you are. This can account for changes to your income, insurance, taxes, and costly home repairs.
4. Don’t count on a home mortgage interest deduction.
You might be tempted to purchase something you can’t afford, thinking that your home mortgage interest deduction will save you enough to make up for it. Think again. Only 1/3 of taxpayers actually claim this deduction, and it decreases the longer you own your home due to a decrease in overall interest.
Even if you do itemize your deductions and claim the home mortgage interest deduction, you’re likely to save only $1,400 by paying $5,000 in interest (and that’s just interest, not the money you borrowed for your mortgage).
5. Make sure you’re buying a home for the right reasons.
Many people buy homes because they think it’s the right thing to do, and it can be. But that’s not always the case. If you’re considering buying a home because you feel pressured to do it by a certain age or you think it’s always a good financial decision, take some more time to think before buying.
Buying a home can be a great financial investment, and it can be a great decision for your lifestyle. But that’s always the case for everyone. Be sure you understand your reasons for purchasing before you move forward.
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