Buying a Home is a Complex Decision
If you’re thinking about buying your first home, chances are you’re wondering: “Is now the right time?” The answer is complex and every situation is unique – and unless you have incredible intuition, you may want to explore several questions before making such a big decision.
Considering Buying a Home? Consider Asking Yourself These Questions.
- Is the concern of a recession on your mind? A recession could happen within the next couple of years but most professionals do not see an impact on the housing market. ATTOM Data Solutions analyzed the impact of the last five recessions on the housing market and found in three of the recessions, home prices increased. During the recession of 1990, home prices only decreased by a percent. The big exception to this was the 2008 recession. It’s important to do your research so that you can feel confident that you’re making an educated decision.
- Do you have savings set aside for a down payment? Even though there is no down payment required for a VA loan, the down payment may have value. Paying nothing down means you may work longer to pay off a mortgage. Following the advice of personal finance expert Chris Hogan, you can pay off your mortgage early. In this article, Hogan illustrates how much interest is due on a $200,000 loan at 4% interest. He notes a 30-year loan costs $143,000 in interest whereas a 15-year loan only costs $66,000. Hogan adds that families with a 30-year loan have options, too – they may pay extra towards the principal each month to pay off the loan faster.
- Are you considering “location, location, location”? Schools, shopping, health care, and jobs are a few of the factors to consider when selecting a location to call home. Another factor you may want to consider is whether or not the neighborhood you’re looking to purchase a home in is an “economically stable neighborhood.” Economically stable, in a nutshell, means that it has survived economic downfalls and buyer interest in the location has remained consistent.
- Is renting for the location better than buying? There are Rent vs Buy Calculators to help you analyze the math. This Realtor.com calculator allows you to fully break down home costs, down payments, rental costs, etc. If you know how many years your assignment will last, you can weigh that against the rent vs buy curves as well.
- Are you prepared for the unexpected? When you rent, the landlord takes care of the unexpected dishwasher maintenance. However, when you own a home, YOU are responsible for taking care of the unexpected. Saving $500-$1,000 towards an unexpected maintenance cost may help you weather the unexpected when it occurs – and it will occur.
- If you do buy the home, how long do you intend to keep it? When you go to sell, buyers will be thinking location, location, location. Bases near economically stable neighborhoods may make it easier to sell a home, whereas bases far from economically stable neighborhoods may make your home tougher to sell.
- Would you consider renting the home if you PCS’d to another location? I have served with many military families who rented a home near one base while assigned to another. Owning rental property does has advantages and the monthly rent payments may be applied towards the rental property mortgage to build equity. On the flip side, there are many pitfalls to owning a rental property as Holly Johnson explains in her article: “What I Wish I Knew Before Buying Rental Property.” If you are considering renting, be prepared.
Make the Best Home-Buying Decision for You and Your Family
Buying a home is a great investment given the right environment. Consider your options and know what you are getting into before you buy your first home. You and your family will be better prepared for the unexpected.