Buying a home is often a confusing process, because there are a lot of different financial factors that come into play. Most people buy a home as an investment in their future, and owning a home could end up potentially costing you more than renting would. It's best to think of your new home as an asset you are paying into.
Consider Closing Costs
Closing costs on a $400,000 property could cost as much as five years of rent. In some cases, the seller will cover half of the closing costs. Buy a home you plan to live in for a while. This will make sure you don't end up losing more money across the long run after the sale closes.
Look at All Your Loan Options
Larger companies like Quicken loans often provide better rates and small companies may make it easier for you to obtain a loan, but the interest rates are often much less competitive. Make sure you completely understand the terms of the loan before you sign anything. There are many types of mortgages, but the general principle behind most is that shorter loan terms have lower interest rates and higher monthly payments.
Consider Maintenance Costs
A lot of renters don't realize they are responsible for fixing all the property when they own a home. This is often offset by the fact that you're paying into your mortgage every month. A lot of people end up making a huge profit when they do decide to sell their home while some lose money. A lot of businesses specialize in professional inspections. You should have a potential property inspected before you put in an offer. You may end up losing a quarter of your investment because the pipes beneath your property need to be replaced. A lot of people prefer condominiums because they only pay a monthly fee to have the external areas of the property maintained.
Property Taxes and Insurance
Property taxes vary based on the state. They're almost always determined by the fair market value of the property. Insurance also requires quite a bit of cash. Homeowners insurance is usually required as part of the terms of a mortgage. Different types of insurance may be required and insurance rates tend to be much higher for beachfront properties.
Buying a house may be the biggest and most important investment you ever make. It's better to wait for a good buyer's market since buying a home with a cheap market value is a good way to ensure your home remains affordable a long way down the road.
About the author: Brooke Chaplan is a freelance writer and blogger. She lives and works out of her home in Los Lunas, New Mexico. She loves the outdoors and spends most her time hiking, biking and gardening. For more information on getting onto good financial ground, talk to experts like Premium Mortgage Corp. to get the best estimate for your situation. Brooke is available via Twitter @BrookeChaplan.