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Should I Go Big When I Buy a Home?
If you’re getting ready to buy your first house, you might think a “starter” home is the best option. While this may be true, there are benefits to buying something with the long run in mind. Today, the Chism Atnip Team takes a look at a few of the reasons why you might go either route.
Be Realistic about the Cost
Your first goal is to determine how much house you can afford. Start by figuring out how much money you have coming in each month, and then take a look at what you can put down. Your local mortgage agent can help, but keep in mind you will need to plan on anywhere between 3.5% to up to 20%. CNN explains that the more money you can put down, the lower your monthly payment will be, particularly past 20%, when you’ll no longer have to pay private mortgage insurance.
Whether you’re eligible for a mortgage will depend on your current income and employment, credit history and score, and how much you need to borrow. Once lenders know you can afford your monthly mortgage payment, you’ll be able to obtain a loan. At that point you’ll have to decide whether you choose a fixed or variable mortgage. Both have their pros and cons, so do your research before committing to one.
If you find during this process that you can’t afford the kind of house you really want, consider waiting. You can rent a home near your ideal location in the meantime. That choice will allow you to see the neighborhood as a resident to decide if it’s really the best fit for you. Plus, you can save money that you can put towards purchasing the right house when the time is right.
Consider Your Timeframe
Another crucial consideration is how long you plan to stay in your first home. If you’re only going to be around for a few years, stick with something smaller. Ideally, you can find a nice little starter home in an up-and-coming neighborhood so that you can enjoy equity instead of taking a loss if you move within the first five years.
A quick note here: if you plan to have kids while living in that house, make sure that you are familiar with the quality of the school district you are likely to be in.
It’s also helpful to consider your future work plans and their financial effects. If you currently work from home, you may be eligible for tax deductions on goods sold, capital expenses, and personal expenses. These deductions may make a different type of house available to you. Or you may want to consider the amount of space you need now for your business – or may need in the future if you begin a home-based business.
A Small House
If you wind up choosing a starter house, you may find that you have to buy an existing house instead of new construction. This means that the house is likely to need some repairs, which can add up quickly. Be cautious about purchasing a home with an older roof, and have the plumbing inspected by a professional before you put in an offer. You also want to be aware of how many outdated or non-working appliances you’ll need to replace.These costs can add up quickly.
Another choice to make is whether to purchase a home warranty, which can offset the costs associated with the breakdown of a home system or major appliance. Keep in mind that homeowners insurance only covers damage to your home’s structure, theft of belongings, and injuries that may happen on your property. If you want coverage in other cases, you’ll want to invest in a home warranty. Reach out to reputable home warranty companies to determine the typical cost of a policy.
On the positive side, your starter home will probably be much less expensive, and you may wind up in a neighborhood with other couples that are also just starting out. It is important to have recent real estate information before making your decision. You should work with an experienced real estate agent who knows the area to find the right home for your current situation.
Room(s) To Grow
When you think a family is on your horizon or you will soon have your adult parents moving in with you, a bigger house makes sense. Buying your “forever” home can also be a great investment. Although the last two years have seen skyrocketing home prices, Our Family Home explains that real estate tends to appreciate at just under 4% per year. This is still a great return and, in hot markets, you may even double your money by the time the kids leave for college.
On the flip side, you’ll spend a lot more money to start. Plus, it can be more difficult to qualify for a bigger loan if you are still early in your career. It may be beneficial to wait and get some traction on some of your bigger life goals before investing.
Weigh Your Options Carefully
So, should you buy a smaller home or condo or give yourself room to expand? Unfortunately, only you can answer that question, but you can start answering it by evaluating your budget and what kind of mortgage you’ll be approved for. Then, decide what’s most important to you. If you need to save money, stick with a smaller space or even consider renting for awhile first. If your goal is to put down roots immediately, check into a home warranty, and make sure you have spare bedrooms for the kids and your home business.
The Chism Atnip Team of Keller Williams Realty is your #1 choice in realtors to help you find the perfect home in Corpus Christi and the surrounding Coastal Bend area. Connect with us today by calling (361) 946-1187!
Written by Tina Martin
