We already discussed why buying is a much better option than renting in our Regretful Renter blog. If you have decided that now is the time for you to dump the rent or you are just ready to shop for a new home, we want to help you be a smart home buyer. The last thing you want to do is to make a decision that you will regret. Follow this advice from financial expert, Dave Ramsey, and you will be on your way to being a smart and satisfied home buyer.
- Do your own math and figure out what you can afford. Don’t rely on the bank to budget your money. You know how much you spend on sports and activities for your kids, grocery store trips, filling up your gas tank, etc. Don’t take out a loan for more than what is reasonable for you. You will struggle to pay the house payment and likely regret the purchase causing stress and possibly ending in foreclosure. That does not make for a happy homeowner. The smart home buyer will figure out how much they can afford before they ever go to a lender to be pre-approved. They will only look at houses in their price range to keep from letting their emotions take control when they fall in love with a home that is too expensive. Also, if you are a two income family, you may want to consider buying what you can afford on just one income. This will help prevent financial strain in the event of job loss by one of the bread winners.
- Choose your mortgage wisely and avoid risky options. It may sound more appealing to go with an adjustable rate mortgage (ARM) to get a lower initial monthly payment, but beware! Those low rates only last for a short time before shooting up. ARM’s played a huge part of the foreclosure spike not too long ago. Play it safe by going with a fixed-rate mortgage from the get go.
- Plan for the future. You may only intend on living in the home for a few short years, but you never know what will happen. Make sure you like the area and school districts. Keep in mind growing children and/or expanding your family. Will this home suit you for years to come? Will you be able to afford the home, utilities and any necessary repairs? If you are unsure, call on an experienced real estate agent to help you answer these questions.
- Save as much as you can for a down payment. This will ensure that if the market was to crash again, you won’t have to worry about being upside down on your mortgage. A larger down payment means more equity in your home. If you can fork over the larger payment, it will be worth it.