Buying a house can either be an incredible experience and (hopefully) a great investment or it can be the culprit of bankruptcy and a lot of unneeded stress. You don’t want to be in the latter of the group.
Here are three things you should consider before buying a house.
What Kind of Payment Can You Handle?
Just because the bank will lend you a certain amount of money doesn’t mean you should take it. Your home buying decision should be based on a variety of factors – your income and job security being one of the most important. And make sure you really understand your debt-to-income ratio! Student loans can negatively impact buying a house.
Don’t take the maximum amount of money the bank will loan you unless you want to be house poor. And don’t forget to think about the other expenses that come along with a house like insurance, property taxes, utilities, maintenance, and home improvements.
Those sort of expenses can really add up fast and amount to much more than you anticipate.
Will You Live in This Home Forever?
Sometimes it makes sense to spend more on a home if you plan on living in it for the rest of your life. If you don’t, however, you need to think of your home from an investment mindset.
Ask yourself questions like “will I be able to sell this when I’m ready to move?” and “could I potentially make money off the sale of this home?” These questions can help you be objective during the home buying process.
If you plan on living in your home for a few years and then renting it out you need to research the rental market of the area before buying. The location of the house can make a huge difference when it comes to being a landlord.
Are You Willing to Settle for a Fixer Upper?
If you really want to stretch your budget and get the most for your money you might want to consider buying a house that needs some work. By buying a foreclosure or short sale you can get a lot more house for the money in a lot better of a location.
On the other hand you need to make sure that you don’t get in over your head. If you don’t have construction experience it’s in your best interest to buy a home that only needs cosmetic updating.
And always remember to get a thorough property inspection before buying any house!
Before you purchase a house you need to carefully consider what you can comfortably afford, how much work you want to do, and whether or not you’ll be selling your house down the road. Thinking about just those things can help guide to you to making the right home buying decision.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.