Your first steps, your first love, your first job… Your first home. Life is full of joy giving firsts.
You just got married and can’t wait to co-own, you want to move out of your parents’ or you are simply just done with the renting spiral. For whatever reason, you are ready.
Not so fast ! Purchasing your first property is a big step. It’s a huge commitment that needs preparation.
Ideally, getting some professional help and sit down with a real estate agent and a financial advisor is your best move. But for now, you can already ask yourself some pointed questions to find out what you need and what you can have.
Here is to get you situated.
Can you afford it ?
Probably the most obvious one. If you came up with the decision to buy, it’s because you think you have saved enough for it. It’s where it all starts.
Are you financially ready to buy a property ? At this point, you need to be aware that this investment will have a significant impact on your overall finances. You also need to keep in mind that buying a property will involve other upfront costs : moving expenses, new furnitures, closing costs, down payment… So, make sure you can handle it.
Reviewing your financial situation is key before looking up for your dream house.
What if you can’t afford it ?
If you have saved enough, paying cash is always best. Otherwise, you will have to give up a certain percentage of your monthly income. In other words, credits.
Before making your mind about going for a bank loan, a private mortgage or any other option, you need to figure out what kind of monthly payment you can comfortably afford. A simple way to find out is by using an affordability calculator ( you can google it ) that will analyze and compare your gross income, your property taxes and borrowing payments with your down payment, interest rate and amortization. As a result, you will get your maximum purchase price, the maximum affordable mortgage amount and the monthly payment you can afford.
What’s your plan for the next five years ?
So, you want to buy a home. But how long would you be staying there ? Do you see yourself living there for the next five years ?
Real estate agents and finance experts will agree on this, if you are not planning on staying for at least five years, you might as well forget it right away. You simply would not recoup the expenses of buying even by selling back, and property depreciation will backstab you.
Are you buying with a partner ? If so, what to do ?
Before co-owning, you need to understand and master the concept of co-managing money ; as a couple, it is important to have a clear knowledge of your overall financial situation : how much money and / or debt your partner has. This will also help on determining whether you can have your dream house, a smaller version or just keep renting for now.
Sit down and expose yourself.
Is it worth it ?
What goes up, might come down. In the reality of today’s market, you need to keep in mind that the value of your property might decrease, look back on the housing crisis of 2007-2008. The depreciation rate varies depending on your area, the economy and some other factors. Call in mind you are buying a home not a house. If you’re plan is to stay there forever, this is irrelevant but if not, you should think about paying less than what you can afford. Why ? Big house equals bigger everything : expenses , repair, upgrades and bills.
Buying your first ever house can be either a dream come true or a nightmare. Jumping into the void and crossing your fingers won’t work. It is a lifetime investment. Do not rush.