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5 Considerations Before Buying Your First HomeThe following is an excerpt from "My First Home: A step-by-step guide to achieving the ultimate American Dream."
Before you lay down your deposit, consider these items before you buy your first home.
“ You do not need to save 20% for a down payment. However, you need to remember that there’s more to buying a home than down payments and closing costs.”
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There are many advantages of home ownerships, but it ain’t all roses and peach n’ cream and such. Before making (probably) the biggest financial decision of your life, you should do your homework. If you don’t, your dream can very well turn into your greatest financial nightmare.
Let’s face this reality, some people out there have no business owning a home at all, ever. Most of you, however, will eventually buy a home and be perfect homeowners. You just need to do a little legwork and for some of you, address a few poor early 20’s life choices.
Some of you are completely qualified to buy right now. You have great credit, ample assets and a solid income. Having these qualities qualify you to buy, but should you?
Here are some of the reasons you might consider waiting.
You Might Relocate Soon
Commissions, closing costs and other fees will cost you around 5-7% when you sell. If you held the home less than two years you will also have to pay capital gains tax. Hold it more than two years and you avoid that burden.
Of course, you could always rent the property when you move, but do you want to be a landlord? Many people enjoy the income it provides while others enjoy not dealing with tenants of questionable intelligence, cleanliness or financial responsibility.
Your Job (or Income) Is Not Secure
Economics are cyclical, but they are also subject to societal whims or technological advancements that render them redundant.
Self-employed or working for a Fortune 500 company, it doesn’t matter. If you lack the wiggle room needed to absorb a slow year or a few months, then you need to reconsider buying a home.
You’re in a Ton of Debt
Heavy-debt makes it harder to qualify for a mortgage. It throws your mortgage qualification into the red-zone, makes it difficult to save for a down payment and lowers your credit score.
In other words, it takes the decision to buy out of your hands because it is simply not a possibility.
Your Assets for a Down Payment Are Slim
You do not need to save 20% for a down payment. However, you need to remember that there’s more to buying a home than down payments and closing costs. You have an inspection, appraisal and the cost of moving to consider. You might need some new furniture too.
If you must put any of those expense on a credit card you should pause and consider your decision. Don’t let the closing process wipe you out, you need money for additional expenses.
No Budget for Additional Expenses
Don’t fall into the trap of thinking your mortgage will be your only expense. While you were a renter, your rent may have been your only home-related expense, but as a homeowner, you need to pay the plumber, electrician, handyman, roofer, HVAC company and more.
Make sure you have enough wiggle room in your budget for these bills.
Shashank Shekhar is the Founder and CEO of Arcus Lending, a Silicon Valley based mortgage company. This article is an excerpt from his latest book "My First Home," a #1 best-seller on Amazon.com.
Let’s face this reality, some people out there have no business owning a home at all, ever. Most of you, however, will eventually buy a home and be perfect homeowners. You just need to do a little legwork and for some of you, address a few poor early 20’s life choices.
Some of you are completely qualified to buy right now. You have great credit, ample assets and a solid income. Having these qualities qualify you to buy, but should you?
Here are some of the reasons you might consider waiting.
You Might Relocate Soon
Commissions, closing costs and other fees will cost you around 5-7% when you sell. If you held the home less than two years you will also have to pay capital gains tax. Hold it more than two years and you avoid that burden.
Of course, you could always rent the property when you move, but do you want to be a landlord? Many people enjoy the income it provides while others enjoy not dealing with tenants of questionable intelligence, cleanliness or financial responsibility.
Your Job (or Income) Is Not Secure
Economics are cyclical, but they are also subject to societal whims or technological advancements that render them redundant.
Self-employed or working for a Fortune 500 company, it doesn’t matter. If you lack the wiggle room needed to absorb a slow year or a few months, then you need to reconsider buying a home.
You’re in a Ton of Debt
Heavy-debt makes it harder to qualify for a mortgage. It throws your mortgage qualification into the red-zone, makes it difficult to save for a down payment and lowers your credit score.
In other words, it takes the decision to buy out of your hands because it is simply not a possibility.
Your Assets for a Down Payment Are Slim
You do not need to save 20% for a down payment. However, you need to remember that there’s more to buying a home than down payments and closing costs. You have an inspection, appraisal and the cost of moving to consider. You might need some new furniture too.
If you must put any of those expense on a credit card you should pause and consider your decision. Don’t let the closing process wipe you out, you need money for additional expenses.
No Budget for Additional Expenses
Don’t fall into the trap of thinking your mortgage will be your only expense. While you were a renter, your rent may have been your only home-related expense, but as a homeowner, you need to pay the plumber, electrician, handyman, roofer, HVAC company and more.
Make sure you have enough wiggle room in your budget for these bills.
Shashank Shekhar is the Founder and CEO of Arcus Lending, a Silicon Valley based mortgage company. This article is an excerpt from his latest book "My First Home," a #1 best-seller on Amazon.com.
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