Purchasing a new home is a major decision. Homeownership can help you build a strong financial future and a stable environment for your family, but there are some important questions to ask before you commit to purchasing a home.
Here are a few things to consider before investing in a family home.
Property Valuation
Typically, sellers use a number of factors when deciding on an asking price. They can look at historical sales prices for the property, the neighborhood, the current real estate market, and the age of the construction. The overall appeal of the home is another important factor.
Before you purchase a home, do some research about the current market. Factors like low-interest rates can drive demand and ultimately cause home prices to go up.
Ask whether the seller is asking for more than the home is worth and consider how well the neighborhood and home will retain their value over the years.
You should also ask yourself if you’re willing to invest in the property to maintain or increase its value through home remodeling projects.
Income and Credit Score
It’s best to wait until you have a stable financial situation before committing to buying a home for your family.
Do you have job security? Is your current income sufficient for covering mortgage payments and other expenses related to owning a home? A good rule of thumb is to spend 28% of your monthly income on your mortgage payments.
Look into improving your credit score before applying for a mortgage. You can qualify with a minimum score of 620 or less for government-backed loans, but a score of 740 and above will help you secure better rates.
Renting Vs Homeownership
In the long run, purchasing a home costs less since you will eventually end up owning the property and won’t have monthly payments to make. Building equity in a real estate property is interesting because you can borrow against it to finance your other projects.
However, renting costs less in the short-term because you’re not spending money on property taxes, mortgage insurance, or home repairs.
Long-Term Goals
Buying a home is a commitment, and you need to consider what your long-term goals are for your family. Do you plan on having more children? If yes, look for a home with additional bedrooms or with a structure you can upgrade with additions.
Is the home in an area where you can see yourself retiring? Do you plan on selling the home once your children grow up and leave? Would you consider keeping your family home to rent it?
Job Prospects
The modern job market is extremely flexible. On average, people have 12 different jobs over their lifespan.
It’s important to consider what the local job market is like when purchasing a home. Will you and your partner have access to exciting opportunities in your respective fields? A property near major cities and hubs will give you access to more job prospects and could help you earn more over the years.
Local School District
As a parent, it’s crucial to research local schools when buying a home. School scores can give you an idea of the level of the different schools in an area.
You should look at how diverse the local schools are and compare test scores to the state average. Are the test scores improving from one year to the next?
Go beyond the number and contact local schools to schedule visits. Local PTA organizations can also help you ensure the local school system will be a good fit for your children.
Home Maintenance Costs
A home is an investment. You need to spend money on repairs and maintenance so that this investment doesn’t lose its value.
Maintenance costs can vary based on the age of the construction. On average, homeowners spend $1,000 a year on maintenance, but emergency repairs can more than double this amount.
Think about future maintenance when purchasing a home. For instance, roofs last 20 to 30 years on average. Buying an older home means you will have to replace the roof within the next few years. Look at the age of the appliances and different home systems.
Get a home warranty to help offset some of these costs. You can get a home warranty to protect appliances and home systems. A home warranty is a service contract that covers repairs and replacements if one of your appliances or home systems fails.
When you get a home warranty, you’ll incur a small monthly cost instead of a major expense when you need to fix or replace an appliance.
Taxes
As a homeowner, you’ll have to pay property taxes. Figure out how much the property tax will be before you purchase a house.
You can qualify for some tax deductions but note that you’ll have to choose between a standardized and itemized deduction when filing. You can deduct expenses like mortgage interests and property taxes, but there are situations where taking the standard deduction is more advantageous.
Final Thoughts
Purchasing a family home is an exciting project. It’s important to plan for this purchase and consider your long-term goals and budget to find the right home for your needs.