If you’re thinking of buying a home, there’s a lot to consider. It’s not just about where you want to live or what kind of property you want to own. You also have to remember that buying real estate is a long-term investment that goes beyond the mortgage, and requires long-term financial planning.
Here are some of the top tips about owning your own place from homeowners who work at Bankrate:
Make sure you plan to stay put
James Royal, investing and wealth management reporter
You need to be committed to own your home for a long time. It’s not directly comparable to a rental home, where you can leave if you don’t like something. So, you want visibility into your job situation and to have clear plans to stay in the area. Ownership is even better for people who never move, because ultimately you can reduce your monthly payment to $0 – perfect if you’re staying in an area a long time.
Always have a rainy day fund
Jeff Ostrowski, senior mortgage reporter
Even after decades of homeownership, I find myself amazed at the time, effort and expense that go into maintaining a house. I’ve got a constant parade of plumbers, electricians and handymen coming to my place. My advice: Prepare yourself for the financial and psychic burden of leaky windows, creaky pipes, failing appliances and fading paint. The chores are endless.
Shop around for your mortgage
Bill McGuire, senior editor
When we bought our first house decades ago, we failed to get much advice and were caught up in the excitement of it all. We spent too much for the house and signed whatever papers were handed to us. We were just so happy to have a home. Later I found out the mortgage rate we got wasn’t competitive, we overpaid for various items at closing and didn’t even realize that if we paid off the mortgage early there would be a prepayment penalty. Lessons all learned the expensive way.
Establish good savings habits ahead of time
Greg McBride, CFA, chief financial analyst
If you don’t have a demonstrated track record of being able to save money before you buy a home, you’re probably not going to figure it out afterwards. That’s my biggest piece of advice, to have the habit of saving firmly in place. As Jeff noted above, you’ll have regular repairs, maintenance, and upgrades so having savings and wiggle room in your budget to cover those will help you sleep better. One other piece of advice: be careful about getting into a bidding war and overpaying. The euphoria of the new house will soon wear off but the payments will not.
Don’t put all your eggs in the homeownership basket
Mark Hamrick, senior economic analyst
I urge individuals to try to avoid looking at owning a home as a guaranteed-win investment. While home prices do tend to rise over time, there’s no guarantee on that front. Home prices can be volatile and variable among the many markets across the country. Many communities across the country have seen no substantial rise in home prices for years, while other markets have been quite strong. Owning a home with a mortgage has benefits aside from potential financial returns or income tax benefits. If one does get a substantial return over time, that’s a plus.
Make sure you calculate the full cost
Zach Wichter, mortgage reporter
When I bought my co-op I really focused on the purchase price. I didn’t pay as much attention to the monthly maintenance charges, which are essentially HOA fees. I got the apartment for a great price, so my mortgage payment is low, but it turns out my building has very high maintenance relative to other buildings in the neighborhood. Not only does that negate some of the benefits of my low mortgage payments, it also depresses the value of apartments in my building — that great purchase price didn’t happen in a vacuum. I still love my apartment, but if I ever move, I’ll make sure to analyze all the costs more fully and not focus on the purchase price so exclusively.