It’s all smiles until the roof begins to leak and there’s no emergency fund to fix it.
As springtime begins to start poking its head, lots of wondrous things start happening. Trees begin to sprout buds with the promise of another beautiful year. In the Midwest where I live, hopes of warming temperatures and opportunities to grill tasty food dance in my head. Children will soon go on Spring Break, ensuring that homework will only be getting harder to complete as summer vacation looms on the horizon.
And another season of home buying begins!
There is a feeling of rejuvenation, of renewal in buying a new home. If you have been renting a home for several years, the idea of having that money go into buying a property instead of feeling like your money is being shipped “into the void” is appealing. And for that matter, if you are in a part of the country that regularly gets snow, not having to negotiate that while packing and moving is also attractive.
Realtors know all of this. They know what factors drive your buying decisions, and they plan accordingly in how and when they list homes, how they price them in the market, working hard to get the most money possible for the current homeowners. Moreover, according to ATTOM Data Solutions, a leading research firm in property data, foreclosures in 2017 hit a decade-low number. This means that the idea of just buying a foreclosure and cleaning it up, while it makes for a lovely TLC show, does not match the current reality of the housing market in most major areas. This is fantastic if you’re the homeowner selling, but makes for a challenging environment if you’re a new buyer.
But never fear, The Briggs Blog is here to help you get a handle on your home buying journey! Here are some questions and tips to help you be prepared to choose a home that truly fits you and be financially smart while doing so.
How much do you want to spend on your mortgage and taxes each month? Instead of looking at things as a percentage of income, how much do you WANT to pay because other goals, like saving for retirement, education expenses, travel, and other priorities may weigh into how much can actually be afforded. If you travel frequently, perhaps you consider a more economical space that meets your basic needs. If you don’t travel much, you may want to spend more than a typical home buyer on your house because you plan to be there often.
What do you like most and least about the houses you have seen so far? Write your favorite qualities on note cards, and then separate that pile of note cards into three categories – needs, really wants, and things that are nice to have. What you may realize is that something you need is not actually written on a note card – write it down and include it! This will change how you look at house listings, which helps you shop for what is actually a best fit instead of what feels good at the time.
Have a strong emergency fund in place before making a purchase. Once you are a homeowner, things break, and when they do, you have to pay for them. Using all of your savings to buy a home, only to have something major break right away or an emergency medical expense come up may force you to use credit to pay for that emergency expense. Taking on that debt adds risk which, when compounding with an unexpected job loss or other tragic event, means that you could be losing your home outright. I work hard to make sure my clients have a good cash emergency fund to avoid the biggest risks turning into losing something they worked so hard to earn.
Make sure your credit score is accurate and dispute any discrepancies before you start working with a mortgage lender. Additionally, if your credit history is poor, it may be wise to take some time to build a better credit history by waiting to buy and focusing on making on-time payments, building a stronger emergency fund, and eliminating debt obligations before jumping into the market. Be careful as you do this to avoid predatory credit repair companies and debt consolidation companies. A good financial planner working in conjunction with an ethical mortgage lender can provide you prudent guidance on how to attack this.
Do your homework on the realtor and mortgage lender you choose to work with. Ask people you trust for referrals. Additionally, choose a home inspector that is independent of the realtor and lender you work with. This will help avoid any potential conflicts of interest and make sure that when you really like a home, you are getting unbiased verification that the home is in the condition being represented, because once you own it . . . you own it, taking the bad with the good!
Research the neighborhood you are moving to. Google maps, crime reports, and education ratings are all a great starting point for evaluating a community online. I am also a big fan of going out, perhaps for a couple of days, and getting a feel for how the community you’re looking to move into both during the day and at night. Is there a ton of traffic when you want to head to work? Are there strange people walking around at night, or is it well-lit with people walking the dog at 9:30pm? Make sure it’s an environment that you feel safe in, because even the best home on paper won’t be a good fit if you don’t feel safe and comfortable living in it.
Consider your future work plans. What are your plans with respect to work? Are you happy with where you are working? How consistent is your work/income? Changes in work may involve an eventual commute that’s no longer sustainable, so work plans influence how close someone may want to live to a population center. Contract work or self-employment can lead to an inconsistent income stream, which may mean purchasing a less-expensive home to avoid the risk of the mortgage being too expensive during lower-income months.
Make sure family plans are taken into account. Do you plan to raise a family? If so, how many kids do you have or want to have? How much space do you want to raise your family in? Will your parents or other relatives potentially move in at some point? Planning these ideas in advance avoids having to move out shortly after moving in, which can cost money down the road.
With some thought ahead of time, careful research, and patience, you will find a home that is a great fit for you. Home ownership can be a gratifying and wonderful experience, and I hope that this list helps you wrap your head around the “big stuff” in finding that perfect match. Good luck in your home buying efforts this season!
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Finally, if you feel that working with a financial coach could help you stay on track in reaching your personal financial and investment goals, schedule a free consultation or email me at steven@briggswealth.com – I would love to meet you!
