By Waymond Lightfoot
Are you considering buying that first home, but are torn between a smaller, more affordable home and one that will accommodate potential life changes? Purchasing your first home may be one of the most important decisions you will make in your lifetime. Among things to consider are your budget, location, and future plans, including job security, relocation, and children. Proper planning – both medium- and long-term – can help you in your home-purchase decision.
What might affect your decision?
There are a number of things to consider that might affect your decision to buy a particular size of house. If you buy a home that fits your life just right today but plan to have kids (or more kids) in the future, you may have to make a choice between adding on to an existing home or moving up in the market to a bigger house.
Consider your parents. If they are elderly, might they have to move in with you someday soon? Is your job security shaky or do you plan to change careers? Maybe your career is moving along quite well and you expect your income to rise dramatically in the near future. You might even want to consider the possibility of relocation. It’s definitely not unheard of. You have to decide how likely any of these scenarios are to know how much consideration to give them. “Trading up” or adding on at a later date may cost you more than buying a larger, more expensive home today. On the other hand, you don’t want to buy more house than you need if you don’t think you will use the space later – or if you think your ability to pay the mortgage is extremely shaky.
The financial factor
Careful planning in your home-purchase decision also includes examining various loan options. Certain financing options make more sense if you think you’ll stay in a house a longer amount of time or vice versa. If you expect to stay in a house for 10 years or more, you may feel more comfortable with a 30-year fixed rate mortgage – as long as interest rates remain at attractive levels.
Maybe your intention is to “trade up” after only three years, so you get an adjustable rate mortgage (ARM) with a lower interest rate. An ARM is different than a fixed rate mortgage because the interest rate fluctuates in accordance with the market. ARMs generally have initial lower interest rates, but can increase as the market changes. But what if you stay in that house for 12 years and interest rates go way up? Can you sleep at night with that risk?
If you are leaning toward a more affordable home now, you might also want to consider other costs of “trading up.” When you take out the new mortgage you’ll usually have to pay points from 1% to 3% of the loan amount. There are additional costs that can eat into the equity you earned from your fist home, including inspections, appraisals, and filing applications. This doesn’t even take into account the overall costs of moving out of the old place and decorating the new. If you decide the costs of moving outweigh staying put, you might be looking at a remodel for added space. Factoring in time and trouble, it might be in your best interest to buy that bigger, more expensive home now.
There are a number of factors to consider when choosing the right first home. Ultimately, you need to weigh your needs, your goals and plans, and your risk level to make the best choice for you. Your Texas Realtor can help you every step of the way – from finding the home that best suits your needs to planning your home-purchase decision around life’s expected or unexpected changes. For more information on finding your home sweet home right here in Texas, I invite you to visit TexasRealEstate.com.
For more information, visit TexasRealEstate.com. For professional services, contact RE/MAX Genesis at 830-833-2000 or firstname.lastname@example.org.