Financial Considerations of Home Ownership

Financial Considerations of Home Ownership

Buying a house is a huge commitment where you not only invest your entire life’s savings and income but you also need to give it the love, care and time for it to grow. When it comes to home ownership, there are a lot of financial aspects you need to consider, like for instance, finding a lender, the mortgage payments, down payment, property taxes, homeowner’s insurance, closing costs and so on. After buying the house that’ll be a part of your American Dream, there’s more stuff to take into account. For instance, the house you’re in, does it need repairing? Do you have to buy furniture and appliances to make it feel like “your” house? Are there basic utilities available and if so, there are fees to be paid for it. The list is never-ending. Once you feel like you’re emotionally and financially stable enough to be the proud owner of a house, then go ahead and latch onto your dream.

Reasons for buying that house

Reasons for buying that house

Do you know that house you see, that house of your dreams, with the white picket fence, a beautiful garden out front, a large spacious lawn with a deck out back, and a huge dining room for you to host the occasional Thanksgiving dinner? Yeah, that house you’ve been house hunting for, it’s right there for you to grab BUT it’s slightly out of your budget by a few hundred thousand. You need to not only make the right choices but the smart choices as well. Doesn’t matter how pretty a house is or how perfect it is for you and your family if you can’t afford it, you’re just creating a dent in your pocket, what with all the mortgage payments, the loans, the taxes and so on. Don’t let your emotions drive you when you’re looking into investing your hard-earned money, but at the same time, I’m not saying that you shouldn’t want the perfect house, search some more until you find the one that is right for you in every aspect. And remember, when it comes to a house, over the passage of time that glossiness of a new house will fade and it’ll need your time and energy for repairs and maintenance to conserve its glossy look.

Down-Payment

Down-Payment

Like I said, emotional as well as financial considerations are a must when it comes to buying a house. Currently, in the US, down payments range from 5-20% of the house’s value. The greater the down payments the less amount of money you actually have to spend on a mortgage each month and even less amount on the interest loans. I know that paying a huge sum of money on the first go may seem daunting but, again, if you have the finances and have made up your mind then, don’t hesitate. And remember, it doesn’t only stop at the down payments, there’s closing costs, property taxes, home repairs, maintenance and so on.

Needed Reserves

Needed Reserves

In this day and age, there are a few mortgage lenders in the business that require reserves before buying a house. It’s not enough to simply pay the down payment and the closing costs, you sometimes need to have a saving balance. For the lenders, reserves act as a safety net, say for instance if you have a bad credit score or you’ve already invested in a multi-family unit or if your income stops suddenly, you could at least still carry on the housing expenses. Typically, a reserve is not required for home ownership, only under the above specific conditions are they required. Not everyone has the same mortgage rates. So the best part about this whole reserve business is that you could find a more desirable house for you on lower mortgage rates even if you don’t qualify for the house you initially wanted to buy.

Whenever someone considers buying a house, he/she does not only invest their money but their time, health and energy as well. Don’t let your emotions get in the way and be realistic as well as holistic about your choices and their implications in the future. Financial aspects should be the first thing on your mind when going for house shopping. Get a thorough understanding of the real estate market, the economy, the interest rates, the taxes, closing rates and so on. Think about the long-run before making any educated guesses. And I can’t stress enough, research and be informed about the market to make the right decision. If you need help there’s no shame in approaching an experienced realtor to help you in making a decision. Remember buying a house does require your blood, sweat, and tears but at the same time, the benefits can be extremely rewarding.

After making a thorough assessment of where you’re currently standing and if you think that you’re ready to take the leap then, good luck and Happy House Hunting!