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Are you ready to buy your first home?

Are you ready to buy your first home?

3 questions to answer before you make the move.

Owning your home is like owning a piece of the American dream. It’s yours. It’s a space you remodel and decorate the way you want — without getting the landlord’s permission. It’s where you will make lifelong memories with your loved ones.

For many of us, homeownership is also a path to financial security. Homeownership increases your long-term wealth as your home increases in value, and when you pay down the mortgage. A recent survey indicates that a homeowner’s net worth is 35 times greater than that of a renter ($195,400 vs. $5,400).*

But homeownership is not for everyone. Or, it may not be the right time in your life to become a homeowner. Before you take the plunge, consider these 3 questions:

  • Do you have stability in your life right now?

    If you’re planning to buy a home, you should feel secure in your current job, have a steady income and be ready to stay put for the next 3-7 years. If you’re thinking about starting your own business or looking for a new job, this may not be the right time to buy a home. If a new job takes you to another city, it could be hard to sell a home quickly. If you make a move during a housing market downturn, you may lose the cost you put in. Finally, the cost of buying or selling a home can be significant – think closing costs, inspection costs, and the like.

  • Can you afford to buy a home?

    With the Bay Area’s high rents, it may seem to make more sense to put that money towards a mortgage. But to buy a home, you must factor in all costs of homeownership — and qualify for a home loan. Planning is the key to a successful path to homeownership with minimal amount of stress. Check out our video on the four key steps to home buying.

    • Do you have enough saved for a down payment? If you haven’t started already, start saving towards your goal. While many traditional lenders expect 20% down payment, options exist for down payments as low as 5%. Government-insured programs may also make it easier to achieve your dream, and first-time home buyers should look into local down payment assistant programs.

    • How much home can you afford? Get preapproved before you start shopping for a home so you will know how much you can afford. Sellers will expect to know that you can afford the home before accepting your offer. Lenders typically want to see that you don’t spend more than 30% of your gross income on your home expenses.

      To apply, you will need to provide documentation to show your source of income and down payment. If you have debt, making timely payments or paying it down will also help you qualify. Working with a local home loan consultant who understands the local market can also help you ease through the process.

    • Have you factored in all the costs of owning a home? Owning a home is more than just a mortgage payment. You also need to pay homeowner’s insurance, utility bills, landscaping and property taxes – plus you’re on the hook for maintenance and any needed repairs. When calculating how much your new home will cost you each month, don’t forget to account for these costs.

  • Are you willing to make the trade-offs?

    Let’s face it, renting has its advantages. You are more carefree. You can leave when the lease is up and, if something breaks, it’s the landlord’s responsibility to fix it. When you become a homeowner, you will be responsible for fixing the leaky plumbing and paying the bill. While you don’t want to deplete all of your savings after buying your home, the initial period after you move could be challenging as cash flow could be tight. You may have to make sacrifices and give up vacations or nights out on the town. However, with some discipline and proper planning, the dream of home ownership could be within your reach.

    Learn more considerations for homeownership at our interactive online tool or talk to your local Patelco Home Loan Consultant.


* Source: 2010-2013 consumer finance survey by Federal Reserve.