Can You Afford To Buy A New Home?

To buy or not to buy?  This is a question many people face and one that should carefully considered.  Purchasing a home will likely be one of the biggest investments you make in your life.  Whether you are buying your first home or you have outgrown your current digs, it is really important to examine your finances to see if you can afford to make the move.  As many people have learned in recent years, just because you qualify for a mortgage doesn’t necessarily mean you can afford that mortgage.  Here we look at what you should consider before taking this big financial step.

Analyze Your Budget

Naturally the first thing you need to look at is your current financial situation.  Although no one can predict the future you can certainly look at your present situation and see if home ownership is something you can consider.  Do you have money set aside for a down payment and closing costs?  Do you have high interest debt that is draining your budget?  Are your fixed expenses current and can you comfortably make these payments?  If you just squeaking by now you might want to think twice before adding to your financial burden.

How Long Will You Stay?

While there are many people who buy several homes throughout their life, there are just as many who purchase a family home and remain in it for the rest of their lives.  How long do intend on staying in the area?  If you move frequently for your job or simply like to have the freedom to change locations, home ownership could be a constraint that you can’t afford.  Owning a home is the American dream, however for many people, renting is still the most affordable housing option.  If you plan on moving within five or ten years, maybe buying a home is not a cost effective move.

Can You Afford It?

The real considerations of course are whether or not you can afford a home.  There are many costs associated with not only the purchase but maintenance of a home.  The costs associated with purchase include:  moving expenses, earnest money, down payment and closing costs.  Once you have gotten over that financial hurdle you can then anticipate paying more money to get settled in, perhaps buy new appliances or make repairs or renovations.  Then you have your ongoing mortgage payments, property taxes, homeowners insurance and possibly private mortgage insurance.  Last but not least you have to calculate the cost of maintenance, home owners association fees, utilities and major repairs.

Owning your own home is a big responsibility and it comes with a big price tag that has to be carefully weighed against your available income.  If you have considered all these costs and are able to make all payments then you might be in a position to buy a home.  If you are falling even a bit short, you might want to delay making such a big purchase until you have a bit more wiggle room in your budget.