Purchasing a new home is a huge milestone. It is much more complex and demanding of a process than nearly anything else you may experience in your lifetime. For this reason, you should give yourself as much time as possible to iron out every single detail of the home-buying process before you commit to a purchase. Your financial health, of course, is one of those pressing details. So, as you set out on your house-hunting journey, here are five of the most important financial questions you must ask yourself before buying a home, as provided by the experts at Rex Homes.
What is a Healthy Budget?
Your budget is the first factor that must be established before you proceed with your home-buying venture. The general rule is that your mortgage and other house-related payments should remain at 25% or less of your gross monthly income. Fees you may be charged with, outside of the house’s price include:
- Homeowner’s Association (HOA) fees
- Utilities and maintenance (this sub-budget, so to speak, should equate to approximately 1% of the home’s asking price)
- Home insurance
Should I Have a Depreciation Schedule?
Your home’s depreciation schedule is the method by which you measure its value reduction over time. In the same way, a vehicle depreciates once it’s off the lot, a house begins to lose value immediately after move-in. Brand-new homes might have beneficial depreciation allowances, but a fixer-upper might turn out to be a more profitable investment. Refer to your mortgage lender to discuss which will be right for you.
An Old Fixer-Upper or a Brand-New Home – Which is Better?
Old homes can be upgraded with stunning renovations, and ultimately earn you a pretty penny once you decide to sell. Still, these renovations don’t come out of thin air. You will be responsible for installing the updated assets, and this may not be possible for your budget and expertise. A brand-new home may not be the perfect alternative, either, however. There is no right or wrong here, only what is best for your long-term goals and current financial wiggle room.
Renovations vs. Repairs – Which is Suitable for My Finances?
This is a critical question for planning your finances, of course, but also for preparing for the legal aspects of home-buying. Specific home alterations may be regarded as a renovation, whereas others are repairs, meaning they differ in their permit requirements. As you narrow down your house hunt, pay close attention to what elements you might like to change, then research the permitting and fees necessary to carry out these modifications.
What Type of Ownership Should I Choose?
When you purchase your home, you can choose to have it listed under your name alone, or proceed with a form of joint ownership. You can choose to have your property registered under you and your family, or even your company, as well. Each type of ownership comes with unique financial advantages that you should discuss in-depth before making a decision.
Through all of these questions, it is best for you to discuss these matters with a mortgage professional. They will inform you of the pros and cons of each potential decision and guide you in the right direction to maintain financial security as you decide on a brand-new home.