Buying your first home is a large step for every adult. While many people don't find their dream home right off the bat, it can be tempting to aim above your financial means. There are a lot things to consider before putting your signature on a down payment, and it can be difficult to agree on every aspect of a home with your family. However, make sure you're not overlooking these key factors:
Your mortgage is not the only thing you're going to be paying off for the rest of your life. You'll also have to keep in mind property taxes, utilities, upgrades, maintenance and repair costs, renovation projects and a whole host of other things that can add up quickly. It's best to budget according to what can happen in the future, instead of what you're able to afford right now.
There are numerous different types of loans with varying interest rates, payment terms and amortization periods. Additionally, there are tax credits and incentives from the government that can aid your homebuying process.
Crime rates, schools and local taxes can all have an effect on the overall price of your home and it's important to research every detail of your new community before moving in. Your location is a strong indicator of how much you will eventually pay. Finding the perfect house in a less-than-average neighborhood may not be the best idea in the long run because there could be unexpected costs that could arise down the road.
When you take out a mortgage you'll also want to get homeowners insurance and additional policy add-ons, like property insurance. You should be aware of potential insurance costs, especially if you are considered a risk by insurance providers. With each new claim you file, your monthly premiums could rise, forcing you to have to pay more over the course of the year.
Though your potential new home may be a bargain now, the future could hold different plans. Depending on conditions in the real estate market, your home could soar in value, providing you with a great opportunity to sell. On the contrary, if the economy declines, the value of your home could become less than what you actually paid for it. This could trap you in a depreciating home with little way to recover your initial assets.