5 Ways To Make A Wise Investment Decision When Buying Your First Home
Buying your first home can seem like a daunting task, especially if you’re young. Purchasing a home will be one of the largest investments you will make in your life. Choosing which home you buy, particularly if it’s your first, can propel you to achieving your financial goals. And trust me, making a smart choice for your first home can be very fruitful! Here are 5 ways to make a wise investment decision when buying your first home.
Don’t Get Too Emotional — You’ve probably heard this one before, but it is so important. Becoming overly emotional and attached to a property can be detrimental when searching for your first home. The home buying process can easily become emotional. After all, you’re deciding where you want to call home. I get it, and honestly part of the process should be a little emotional. The problems begin when you become overly emotional. I always say good money and investing habits are so much more than math. Often, the math of things is the easiest part. Harnessing your behavior and emotions proves to be the most challenging. If you find yourself not able to walk away from a deal because you have your heart set on a property there is a high likelihood you are going to make a poor financial decision. Often times when things are going bad around you (the inspection report is bad on the property, the house is over your planned budget, or moving to that location will dramatically increase your commute) you don’t have the foresight to walk away if you’re emotionally attached. Trust me, the right house that makes sense for you is out there. Be patient and don’t compromise on too much just because the kitchen is shiny and new!
Don’t Spend As Much As You’re Pre-Approved For — I’ve seen it time and time again with myself and my friends and family. Banks will pre-approve you for a ridiculous amount of money to spend on a home. Don’t take this pre-approval amount as the amount you should actually spend on your first home. If you do you will most likely find yourself house poor — spending over 50% of your take-home pay on that house you just had to have. You’ll be shocked how quickly the “new factor” wears off. Analyze your budget and decide how much you can comfortably afford. Once you do, don't go over that number! You will be happy you didn't. I suggest allocating no more than 30% of your after-tax take-home pay to your mortgage. Homeownership can be expensive at all the wrong times. Repairs don't show up when they’re convenient. Plus, you need margin in your budget for giving, spending, saving, and investing!
Buy A House That’s Looks Like Old People Lived In It — This is my greatest secret of all! Purchase a home that old people lived in! These homes aren't going to be glamorous and they may even smell a bit funny, but one thing they have a tendency to be are well maintained and in good structural condition. Most people looking for a home can’t look past the ugly paint, orange carpet, and the weird smell. If you can and you’re willing to put in a little sweat equity you can cash in big on that property. And because the property was well-maintained, chances are you won’t run into too many major issues.
Location Is A Big Deal — You’ve heard it before … location, location, location. Well, the saying is true. Buying a home in a great location will help your property value increase over time. People want to live in desirable areas and they’re willing to pay for it. Buying a home in a good area, especially if it’s one that needs a little cosmetic work, is a great strategy for getting big equity gains on your property!
Check With Your State, County, and City For Free Money — When I bought my first home our city gave my wife and me a $15,000 grant simply for buying a home in the city limits. All we had to do was take a 3-hour class and boom, we had the $15,000. I think these types of programs are more common than you may think. Make sure you are reaching out to your state, city, and county to take advantage of this free money!
Buying a home is an exciting time in your life! Enjoy the process and remember to choose wisely. Be patient and don’t make an emotional decision. If you choose wisely you’ll find yourself in a great spot financially in a few short years.
Talk soon,