One of the most challenging, albeit, essential and important decisions, most of us make, is deciding to purchase a home of your own! This period is often a period of tension, uncertainty and nervousness, especially because, for most people, one’s house, becomes their biggest, single financial asset. As a Licensed Real Estate Salesperson, in New York State, for over a decade, I always remind my buyer – clients and customers, to examine and consider their personal finances carefully and thoroughly, so as to do what’s best for them. There is no magic formula or elixir, but rather guidelines, which each individual should personally customize, and be as prepared as possible. My suggestion is, before one purchases a home, examine and understand your personal FINANCES.
1. Funding: In most cases, a 20% downpayment will be needed, although this number may differ, under certain circumstances and condition. While lower downpayment options might seem attractive, be aware it means you will have a higher monthly carrying charge. On a $500,000, a 20% downpayment represents $100,000, plus closing costs, which include items like title search and insurance, bank fees, utilities adjustments, tax adjustments, attorney fees, etc. In many instances, one must have ready cash which the lending institution can readily identify. Will you be prepared?
2. Inspect: Inspect your means, not only in terms of the initial payments, but whether you can feel comfortable handling the monthly carrying charges. It is usually a good idea, to have ready cash, equivalent to at least six to nine months payments/ carrying charges.
3. Needs: Know your personal needs, and comfort zone! How much house do you need, and what will it take, to get you there?
4. Affordability; areas: Is the area you prefer, one which you can afford? Location often dictates pricing, and are there other options, which might also appeal to you, at a lower financial burden?
5. Next door: As a general rule, don’t buy the most expensive house on a block, or in a neighborhood, unless you are quite certain the rest of the area will be moving up, or it is the only one, which fits your needs, and/ or specifications!
6. Clarity: Carefully consider your personal reality! Know what you want, need, and can afford, and make buying and moving into a new home, a pleasure, rather than a burden!
7. Earning power: Consider your personal earning power, not only, at present, but in the future. How stable is your situation? How secure is your employment/ earning situation? What will you do, to prepare for contingencies? This is another reason, to always maintain that 6 – 9 months buffer!
8. Strength: Focus on maintaining financial health, by avoiding the trap of overly depending upon credit, and spend/ buy wisely! Solid finances will generally be a keen strength!
We encourage you to become a homeowner, but caution to do so wisely! Be prepared and home ownership will often be the best thing you have ever done!