Deciding to buy a home is an exciting milestone and one that should be taken seriously with proper guidance and education. Buying a home is likely the single the largest purchase most people will ever make and we wanted to include some key items to consider when planning for your purchase. Taking the time to look at these concepts when buying a home can be the difference between a joyful experience and one that may cause regret. It extremely important to have a great team helping you through each stage of the home buying process because they will reduce stress and help make it far more enjoyable. Overall, your success and happiness are the most important aspects for us so included here are some tips that we have found over the years that have really helped out our clients looking to buy a home.
Long Term Investment
Buying a home should be considered a long-term investment and is historically one of the of the best ways to build wealth over time. Spending a little effort up front will help set the foundation for an excellent home ownership journey. Here are some questions and items you should consider to help make your home ownership journey an enjoyable one:
- How long would you like to keep the property?
- How much down payment will you need?
- How much can you comfortably spend on your monthly mortgage payment and costs?
If you plan on keeping the property for more than 10 years, a Fixed Rate Mortgage may be the best option. When planning on keeping the property less than 10 years, an Adjustable Rate Mortgage should be considered. Many home owners also choose to keep their properties as rentals or investments upon moving out which can help with retirement planning and long-term wealth creation. Owning a home for a long-term benefit will mean that you will be required to make monthly payments for the long-term as well. It is important to consider what a comfortable monthly payment will be while also allowing for extra savings to help with future home improvements. Higher down payment will also help provide a lower and more affordable monthly payment.
Location, Neighborhood, and Schools
Not only are schools, safety, and local trends important for you as a home buyer, but these things will also affect the future resale value of your home. Most home buyers will look for a property with a central location to jobs, a safe and friendly neighborhood, and great public schools. There is a lot of research that can be done on these common buying factors and we encourage our clients to spend some time doing so. There are organizations such as “Great Schools” that will rank the quality of all local schools. These ranks can easily be found online. For job opening and location to jobs, you can always look up local job search websites and see how many openings there are for high paying jobs and to find out which companies are moving in or out of the area. Once you find out who the local major employers are, it is beneficial to see how far the home is from them using a mapping system. Neighborhood quality and local crime are the most difficult to analyze. Some people call the local police department to find out crime rates and trends for that specific neighborhood or area. You can also try to look up current and planned growth of the local area from city websites or city press releases. In addition, it is always a great idea to visit the neighborhood at different times of day and different days of the week to get a true feel of the area.
If you are you only thinking about your monthly mortgage payment when it comes to budgeting for your new home then you are missing out on some other critical areas of focs. You will also need to take into consideration expenses for property taxes, insurance, HOA, repairs, and maintenance. Not sure how much to budget for yearly property taxes? A good rule of thumb is 1.1%-1.2% of your purchase price per year. To be exact, you may search online to find out what percentage your county will charge home owners. In addition, check to see if there are any mello-roos which may add an extra expense per month. These are special taxes for community facilities and it is easy to receive an insurance estimate to use for your budget. Contact any major insurance company and find out if they provide homeowners insurance. Normally, .30% of the purchase price per year is a safe estimate. Maintenance and repair costs will depend on the property quality, but make sure you research if the home will have an HOA fee per month.
Property Quality and Age of Home
When buying a home, it is important to consider the age of the property and any history of renovations. Know this ahead of time and prepare your long-term budget accordingly to avoid any repair surprises. It may be better to spend more money upfront in order to avoid extra maintenance costs and future headaches. Also, if the house is old, there may be special laws you have to follow due to outdated safety or material standards, so these are things to think about. On the other hand, buying a house that needs more work may allow you to get a better deal, fix it up yourself, and add extra value in a shorter period of time. Whatever you choose, it is important to look for a property that aligns with your long-term goals.
Potential Lifestyle Changes
Many people do not fully consider the potential lifestyle changes that may occur when looking to buy a home. One important consideration is if you are looking for urban or suburban style living. What have you been used to and what do you enjoy the most? If you highly value an active lifestyle with easy walkability, this should be considered when looking to buy a home. Also, do you like more privacy, or would you rather be around activity and have people close by? Be sure to identify what environment complements your life and what helps make you truly happy.
Traffic and Drive Times
In real estate they say, “Location is everything”. It will be important to visit your potential home at many different times of the day and also different days of the week for traffic patterns. Will you be commuting to work? Visit the property and experience what traffic and drive times will be like at that time of day
and how it may affect your daily commute. Also, how often do you need to visit schools, grocery stores, gas stations, and other necessary shopping places? Make sure to track these drive times as well to understand length of time that will be spent in the car. Lastly, keep in mind that traffic patterns may negatively affect property value if you the neighborhood is known for heavier traffic, or if the local traffic app routes extra cars your way during busy times.
Lastly, an important benefit people forget to consider when purchasing a home is the real estate tax benefit. The latest tax law will allow home owners to write off the mortgage interest expense on a home loan up to a $750,000 loan amount. This can add significant tax savings for home owners and may improve their monthly budget and home affordability. Some people are also able to write off a portion or all of their property taxes.
It is recommended to speak with a tax professional prior to purchasing a home so they can help advise you how much it may help you come tax time. It is important to think about these top things to consider when buying a home, and we are here to help. Our years of experience and thousands of happy clients have allowed us to get pretty darn good at this home buying thing! West Coast Mortgage Group has mastered the art of helping clients through the loan process and we are here to answer any questions you may have. Most of our loan officers work 7 days a week and are here to assist you with your home purchase or mortgage planning. Call us at any time for a free live consultation or schedule a meeting and we would be happy to help.