The decision to buy a home or to continue renting is usually one of the key financial decisions most folks make in their lifetime. Unfortunately, far too many people still rush into buying a home without taking into account all the factors that accompany such a “big ticket” purchase. Here are five things everyone should consider carefully before buying a home.
1) How long you are planning to stay in the property
The general rule – though there are certainly exceptions – is that the more time you are planning to live in an area, the more worthwhile it is to purchase instead of rent. That’s because if you purchase a property, over time more and more of your money will go towards increasing your own equity, instead of simply paying cash out to a landlord – money you will never see again.
2) The tax deduction on your mortgage
Certainly, the government likes to incentivize homeowners with tax deductions that can make home buying attractive. But only after carefully calculating how much money that actually translates to at the end of the year – and weighing that sum against additional home maintenance expenses, insurance costs, and property taxes – should a prospective homebuyer make their move into the home buying market.
3) Property-value trends in the neighborhood
Most folks operate under the assumption that property values will always rise, and that any money they put down now to purchase a home will yield terrific financial gains over time. But one should always carefully evaluate any local neighborhood before investing in it – and also be aware that when it comes to home buying and property values, nothing is truly guaranteed.
4) What reputable Internet sites are telling you about your financial health
Fortunately there are well known websites like Bankrate.com, Realtor.com, and Finance.yahoo.com, that can help you decide by giving you an opportunity to enter your specific financial information, and then coming up with a calculation to suggest whether buying or renting is the preferable option for you. Such sites will also help you calculate your long-term investment and retirement needs and guard you against overextending yourself on any significant purchase.
5) Your emergency fund
Even the savviest homebuyers may be hit by a surprise problem with their newly purchased home. Remember, when you rent, such a problem is your landlord’s burden, but when you own, the financial burden is all yours. To cover these potentially unforeseen issues – along with other emergencies such as unforeseen medical problems or sudden unemployment – the conservative recommendation is that at the minimum you should have approximately six months’ salary in reserve.
The bottom line? – The prospect of purchasing a home or apartment is truly an exciting one; at the same time, however, it is also a decision no one should rush into without carefully examining all the pros and cons. The good news is that our company, J.G. Wentworth – the nationwide leader in purchasing structured settlement and annuity payments for cash now – may, through an affiliate company, be able to offer you a mortgage loan to help you on your home buying journey. For more information, visit our mortgage loan page or call us anytime at 877-227-4713.