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When buying a new house, consider the price, the location, and the ongoing costs you’ll have to incur to live there. Learn why these things are vital.
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When you are buying a new house, it’s easy to get swept up in the magic of looking for the perfect views or a dream kitchen you can’t wait to cook in. But, while you have a lot of things to think about to help you find the right place, it’s essential to prioritize what matters most.
In particular, here are the three most important things that you should consider before you get a mortgage and make an offer to buy a new property of your own.
1. The home’s price
The home’s price has to be the first thing you look at when you buy — unless you’re so rich that you can afford any price. That’s because the amount you pay for your house is going to affect your finances for decades to come.
If you buy a more expensive home, you’ll have higher monthly mortgage payments. A $250,000 loan at 7.00% with a 30-year fixed-rate mortgage loan would cost you $1,663 per month, while adding an extra $100,000 onto the price would bring your monthly payment up to $2,329. That’s a cost difference of $7,992 extra every year you wouldn’t have to save for retirement or other goals.
A costlier home would also necessitate a larger down payment. You’d need $50,000 to put 20% down on a $250,000 home, but would need $70,000 for a $350,000 house. It could take you a lot longer to save the extra $20,000, forcing you to put off your homeownership dream — or to make a smaller down payment, which could raise your interest rate and increase your costs. In this circumstance, your lender would likely require you to pay for mortgage insurance to protect them from potential losses due to your small down payment.
To make sure you stay within your price range, avoid looking at properties that are outside of your budget. You can’t fall in love with a home you don’t see, so you’ll be less likely to make irrational choices if you shop for properties only within your spending limits. Ideally, this would mean looking for homes where the total cost of ownership would be below 25% of your income.
2. The home’s location
Location is also a key factor in determining how happy you’ll be in your house over the long term, and it can’t be changed. You need to make sure the location is safe and is convenient to where you want to go. If you find yourself commuting for hours through horrible traffic each day to go to work or to see family, you are going to be miserable no matter how much you love the house itself.
3. The ongoing costs of ownership
Finally, don’t forget about other costs besides the mortgage. You’ll need to look at things like utilities, property taxes, homeowners insurance, and HOA dues when you decide if a particular house is the right one for you.
The reality is, some homes cost much more to insure — especially if they are in a flood zone. And some have higher taxes, or huge association fees. You don’t want to increase the costs of ownership with these added expenses so much that you find yourself struggling to pay the bills.
By considering these three big factors, you may find the perfect home that really makes you happy. Stuff like the kitchen fixtures or paint colors can always be changed later, but these three things can’t, and that’s why they’re crucial to focus on when deciding which property is right for you.
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