Facebook Twitter

Sticking With Some Home-Buying Rules Makes Sense

Posted on March 15, 2022 by James Whitten

Purchasing a home is a component of most people's lives. It fits right into our financing with saving for retirement and health insurance. It's simply part of our finances.

You'll be able to turn to lots of places for information when purchasing a house. You can speak with a realtor, a mortgage lender or even your loved ones. But there are several tried and true personal finance laws that match the home-buying scenario perfectly.

Do your homework

It was that you were advised to learn as you go. After all, the expression says that you only learn by making mistakes. Not correct. Don't feel like you will need to go out and jump right into a house because that is exactly what you're expected to do. Take a moment and do your homework.

If you don't have the money and the time to devote to a house, then purchasing isn't for you. Look at your finances, job situation, family lifestyle and goals when determining what and if you need to buy. Do not forget that owning a house is a big thing. You won't just have monthly payments, however you'll also have insurance premiums, property taxes, utilities and possibly even PMI to tack on the price tag. Renting could be a much better option for right now.

Buy what you Want

If you get something merely to tide you over, you may discover that it will not last long. Advisors will let you know to purchase quality and for the long term when it comes to big ticket items. The same is true for a house. Yes, buy a little starter home if that's what you need and what your finances dictate. But unless it's a roomy house at a fantastic price, you might need to move fairly soon. And all the commissions and closing costs could be avoided simply by buying what you need today.

Fixed-rate is the only way to go

I know you could be thinking that adjustable rate mortgages have the potential to return in interest rate. Well, they could. But what will you do if it goes up? A fixed-rate mortgage provides you the security in knowing that what your payment is now, it is going to be twenty five years from now. It's not likely to go up and throw your budget from the pit. For those who have extra money, go ahead and add it to your payment and remove that mortgage early.

What's the ideal term? It is dependent upon your finances. But bear in mind, you may own your home faster, have more equity faster and pay less interest over time should you repay your mortgage in 15 years versus 30 years.

Have a backup plan

In case you have not noticed it today, you will. Things go wrong. Often. They simply do. And you'll be happy that you have a backup plan when you're down to your last penny. I see nothing wrong with taking a equity line of credit rather than using it. Simply tuck it away for an emergency. Do not touch it until absolutely necessary. Or better yet -- forgo the temptation and be certain you save some emergency cash. You'll need around three months worth of expenses for security's sake. But if you are not a great saver, then your home equity is going to be a great backup plan.

Take your time

Like rule number one, you should simply take your time and have everything lined up before you jump in. Take the opportunity to search for a house. Examine the neighborhoods, the sector and the houses that interest you. The more you know, the better you'll be at negotiating. There's absolutely no big hurry. There are loads of houses out there. Dream houses are a dime a dozen, believe me. If they were not, so many people would not own houses.

Everything boils down to being wise in your choices. Look at your finances, goals and needs before you think anything else. These variables are the necessities. The rest is just good. By using your financial awareness, you'll see that homeownership is a natural part of life.