Buying Your First Home Means Making Some Big Decisions
When you’re ready to buy your first home, you may be torn between buying a smaller starter home as your first purchase or moving into a home in an area you want to stay in and don’t have to move from in the near future.
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Considerations of a Starter Home
Buying a starter home is a great way to get your foot in the door of homeownership. It can also be an easy way to build equity, as you can use the money you save from renting to pay down your mortgage more quickly. A starter home is typically less expensive than a larger, more expensive home. This means that it’s easier for you, if you are a first-time buyer, to afford and make payments on your monthly mortgage.
It will likely save you tons of money in the long run on things like heating and cooling and property taxes. You can sometimes pull enough equity from the home without having to sell it, leaving you the opportunity to use it as an investment rental property.
A disadvantage of beginning with a starter home is that you will need to move again. It’s not only about the smaller space, but often starter homes are in areas where the schools may not be as well funded as they are in neighborhoods where the homes are pricier. The amenities in areas with starter homes may be less than you might want, like fine dining, bicycle paths, and a large variety of shopping options.
Considerations of a Forever Home
Buying a forever home for your first home is a great investment. You are not just buying an asset but also making a commitment to live in that location for the foreseeable future. You can set down roots for yourself and your family. If you have children, they can grow up in the same neighborhood and attend the same school system throughout their growing years.
You can customize your forever home, too, with the kind of improvements you want for yourself and not just as an investment. Your job options are improved in an area where businesses are likely to locate, too.
Of course, the cost of buying and maintaining your forever home will be higher and you may have to pinch pennies or even work a part-time job to make the payment. Many people feel like this is an acceptable option in order to have the home they want in the neighborhood where they want to put down roots.
Obtaining a Mortgage
The mortgage industry is one of the most competitive industries in the United States. The reason for this is that there are so many different lenders who are all competing for a customer’s business. Mortgage rates, the interest rate that is charged by a lender to a borrower for borrowing funds, are typically quoted as an annual percentage rate (APR) and include the cost of credit, such as points, fees, and other charges.
You should familiarize yourself with the different rates whether you’re considering an FHA, VA, or Conventional loan. Knowing your rate can help you calculate your monthly mortgage payments. Researching what are mortgage rates today can give you current and actionable information to make an informed decision.
Protecting Your Investment
Homeowner’s insurance is important for a number of reasons. It protects you from financial loss in the event that your home is damaged or destroyed by an event not caused by you, such as a fire. It also provides coverage for your possessions in the event of theft and vandalism, as well as loss of use if you are unable to live in your home due to damage or a natural disaster.
Purchasing a home warranty policy will cover things like HVAC systems, which can cost $8,000 to $13,000 to replace, as well as your major appliances. When you do decide to purchase a warranty, look over your home inspection report in case you spot any red flags. For the cost of a home warranty, you can have peace of mind knowing you’re covered when you need it most.
Buying a home is one of the most consequential decisions you’ll make, so ensure you make that decision clear-eyed, taking into account what you want now and in the future. Consider what kind of payments you can afford by checking interest rates and protecting your investment with homeowner’s insurance and home warranty. Then, put down your roots and make your house your home.