After attending a friend’s housewarming party or binge-watching HGTV, you might get the itch to buy a home of your own, especially if you have a down payment saved up. But one lesson we all learned during the housing market crash was that buying a home before you’re ready can have huge financial consequences. Here are a few tough questions to ask yourself before you take the plunge into homeownership.
Is Your Income Reliable?
Can you count on making the same amount of money, or more, for at least the next five to seven years? That’s usually how long you’ll need to stay in your home before you can sell it and not have any remaining debt, as Redfin chief economist Nela Richardson explains in this post. If your company isn’t performing well or you just got a negative review from your boss and could be let go, you should carefully consider how much debt you’re willing to take on before buying a home. Most financial planners recommend having enough saved to pay all of your bills for at least three months, which can be tough after using your funds for a down payment. But having a safety net is critical if you lose your source of income and don’t have friends or family to turn to for help.
What Will Your Family Need in the Future?
If you plan to have children in the next five years, you should look for a home that will accommodate a growing family. Don’t count on being able to sell your home and buy a bigger one before that time comes. You should also take into consideration the future needs of your parents; will they want or need to live with you as they grow older? If you buy a home with an extra bedroom, you can always use it as an office, home gym, guest bedroom or hobby room until your family needs it. But usually that’s more expensive, which leads me to my next point …
What Can You Truly Afford?
Buying a home is, for most people, the biggest (and riskiest) purchase that they’ll ever make. Getting stuck in a money pit or a home you can no longer afford is a real risk. That’s why it’s important to understand exactly what you spend each month, so you know what you can afford to pay.
You should talk to a lender to figure out how big of a mortgage you qualify for, but be careful; just because the bank says you can afford it, that doesn’t mean you can actually afford it, at least without making major changes to your lifestyle. Be honest with yourself! Old habits die hard; chances are, you’re not going to stop eating out or buying new clothes once you own a home, so make sure your budget accommodates that.
You should also take into account new expenses that will arise once you become a homeowner. Basic home maintenance can really add up, depending on how old your home is, and if the home or yard is larger than where you live now, monthly bills like water and heating will increase. And don’t forget the costs of any home improvement projects you might want to take on!
What Sacrifices Are You Willing to Make?
If you can’t afford your dream home, you’ll unfortunately need to lower your standards. Are you willing to commute farther to work? How important is having a backyard? Is it OK if you live in an area with schools that aren’t highly rated? You should know what items you’d be willing to take off of your wish list before you start looking for a home, especially if you are buying with a loved one. And if the answer is none of them, then keep on renting!
When you know what you need, what you can afford and have a backup plan in case things don’t work out as planned, you’ll feel confident that buying a home is the right decision for you. To get started, first learn the 10 real estate terms you should know, and then check out the Redfin home buying guide. When you’re ready to start looking, contact a Redfin agent.
About Sara Fischer
Sara is a Redfin real estate agent serving the Tucson, Arizona, area. She has more than 20 years of experience helping clients navigate the ups and downs of buying and selling homes. If you have questions about buying a home, you can find the contact information for Sara on Redfin; she’d be happy to help.