5 Tips to Make Home Buying Easy (Well, Easier...)

Ben Stoodley  |

You’ve heard it all your life: “Buying a house is the biggest investment you’ll ever make.”

But what house do you buy? When and how do you buy it? How do you ensure it's a good investment? When the time comes that you’re financially ready to purchase a home, many are faced with more questions than answers. Here are a few tips to keep in mind when you start the process. (Finding a good realtor would be an unwritten rule, preceding all these ;-) )

  1. Buy a House within your Budget - This speaks to the question above, “when and how do you buy it?” There are many factors that play into the answer, mainly your location and your income. Buying a house is an investment, where renting is just an expense. In speaking with your financial advisor to determine your monthly housing payment budget, you’ll be able to determine if you can afford property in your area. If so, you need to next get approved by a lender and start the search with your realtor. Being upfront about your budget planning for the future, and consulting with experts are definitely the initial steps in your smart home buying process.
  2. Don’t Drain your Retirement Account for a Down Payment - While many people have done this, most financial experts would advise against it. Your money should be making good returns in your IRA and you will be heavily taxed for making withdrawals before a certain age. This is a separate account, reserved just for retirement. This money shouldn’t be used to buy a house, as you don’t want to alter your retirement plan.
  3. Don’t Pay off your Mortgage too Quickly - While it always seems like a good idea to pay off debt, and generally it is, home mortgage loans are a little bit different. Houses gain equity, where most other type of debt are tied to depreciating assets. Furthermore, mortgage rates are so low that it makes more sense to invest extra money elsewhere. Pay off car loans and credit cards before your mortgage, invest any extra money into retirement and other investment accounts.
  4. Plan for the Future - As we all know, we can’t predict the future. We have no idea if our jobs will last or if any major life event will affect our income. For this reason, there should always be a “rainy day fund,” or a certain amount of money set aside for these life events. A general rule of thumb is to leave enough money aside to survive off of for six months. Generally, this will keep all your bills paid and allow you to continue getting your life back on track, if something does happen.
  5. Downsizing isn’t a Bad Thing - Maybe you’re an experienced home buyer and are now ready to downsize into a condo or something smaller. Maybe you don’t need all that room for your family anymore and you’d rather spend your free time in a different location. Whatever the reason may be, downsizing your home is usually a smart decision... just don’t wait too long. If you’re thinking about downsizing, you’re probably making the right decision. Speak with your financial expert and Realtor to determine if it is a good time to downsize and increase your returns on investment.
All five of these points are the most common home purchasing mistakes. We see it all too often and unfortunately some people will always make emotional buys, purchasing the house they want rather than the house they should buy. Keeping these tips in mind while working with the right real estate professionals, you should be able to find the home of your dreams while making a wise investment.

Ben Stoodley, Hard Money Lender & Realtor

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

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