The typical American has over 40% of their wealth tied up in their home, making it the largest investment they make. So it’s important to think about how to buy a home in the smartest financial way possible. Here are 4 things to do when buying a home.
4 Things to Do When Buying a Home
Buy for the long run
It’s best to buy a home that you’ll want to live in for at least five years. So think about the changes your family will take on in the coming years (adding children, children moving out) and buy a home that’s equipped with the features you need now and in the future. If you think you’ll be moving in less than five years, you may be better off renting. Due to the high startup costs, houses don’t usually make great short term investments. The longer you’re in a home, the more likely you’re able to regain what you paid in transaction costs, and be able to sell for a profit.
Focus on what’s important to you
One of the top things to do when buying a home is to focus on what’s important to you. You may have found a beautiful modern home that’s social media worthy, but doesn’t meet any of your needs. If you are moving to be closer to work or school, or you are moving to have more space, be sure your new home fills your needs. Additionally, if you focus on shiny features, you might break your budget. By sticking to your list of needs, you’re able to spend money where it counts.
Keep a six-month reserve
You never know what’s going to happen in life. If you or your spouse suddenly loses a job and is out of work for a while, you want to be able to continue to make mortgage payments. A strategic reserve will not only save you from financial hardship in an emergency, but will also provide you with peace of mind.
Be willing to walk away
Buying a home is a time-consuming, stressful, but ultimately rewarding endeavor – if you end up purchasing a home that fits your needs. If you are already into the buying process only to realize it’s not really the home for you, be willing to walk away and keep searching. Walking away early on in the process will help avoid regrets later down the road.
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