Have you been dreaming about a larger, roomier or more luxurious living space? Or perhaps just want to experience the joy of owning your own home and building your net worth instead of renting? Let's explore a few questions that can help to answer whether or not you're ready for a new lifestyle as a homeowner.
Can You Realistically Afford To Buy A Home?
The first consideration to make is a financial one: can you afford it? Buying a home is a significant financial investment. In most cases you'll need to manage monthly mortgage payments and expenses related to daily or annual maintenance for many years. The good news: owning a home is a more affordable than you might think. If you're already a stable renter then you're most of the way there.
Do You Have Your Down Payment Saved Up?
If you're confident that monthly payments are no problem, then the next step is saving up enough to cover your down payment. This is a lump-sum investment that you make when you buy the home. The rest of the purchase cost is paid by your mortgage lender, who you pay back over time. Typically your down payment is around 20% of the home's cost, but there are assistance programs which can reduce this further. For well qualified buyers, you can also consider putting down less than 20%--but beware, this means you'll be stuck with PMI (Private Mortgage Insurance) or MIP (Mortgage Insurance Premium) payments in addition to your principal and interest payments. It can start to add up, so make sure you can afford it. There's no shortage of mortgage affordability calculators out there, so give one a try. Just remember the calculator is only as good as the inputs, so take it seriously and come prepared to think about the information it needs to give you an honest assessment.
Do You Know What Type Of Home You Need?
Once you've cleared all of the financial hurdles, you will next need to decide exactly what kind of home you need. If you're a single young professional, a condo or townhome might be the perfect starter home from which you can upgrade later. Or you might prefer something more suburban which comes with more yard space, perfect for pets and kids. Affordability comes into play with this decision too and each type of home comes with it's own pros and cons. Condos often have higher HOA fees than homes, but those fees may include things like water and landscaping. Doing your due diligence and having a good agent at your side to guide you through these decisions are key.
Are You Ready To Set Down Some Roots?
Finally, it's worth taking some time to decide whether or not you're ready to emotionally and physically invest in your local community. Is your career stable enough that you won't be moving for at least a few years? If you don't already, do you envision having children in the future? Are you ready to spend your morning commute to Irvine on the 55 FWY going 15mph knowing that the tradeoff is that you own a beautiful home in Anaheim Hills? Or would you rather sacrifice square footage and yard space to live in condo in Costa Mesa? All of these are considerations that will help you choose the right neighborhood.