2. Can I make lifestyle changes, if needed?
Even if your mortgage payment would be cheaper than rent, unexpected expenses always crop up when you own a house. According to mortgage firm Freddie Mac, a good rule of thumb is to estimate spending 1–4% of your home’s value per year on maintenance and repairs, depending on how old it is. And you may have to deplete some of your savings for the down payment. But, owning a home is often exactly what you’ve set out to save for — talk to a lender about what you can realistically afford, and you should be able to comfortably make your payments, and keep an emergency savings fund.
3. How big of a deal breaker is location?
If you’re living in a hot downtown area, it may be hard to buy a home there, which is often why people move to the suburbs, or up-and-coming urban renewal and community reinvestment neighborhoods. While homes appreciate faster in cities — according to Realtor.com, as of January 2016 urban homes have seen their value grow by 11.3% vs. just 6.7% for suburban dwellings — you’ll probably have less square footage of living space and less of a yard (which isn’t a bad thing if you’re opposed to yard work). There are pros and cons to both city and suburban living, so just make sure to think hard about which is best for you. It’s also a good idea to talk to friends and family who live in areas where you’re considering buying a home.
4. Can I afford the utilities?
And we’re not just talking about the cable and Internet bills, services you can live without (maybe). If you have to pay the utility bills alone, like electricity and water, will you be able to? Or do you anticipate renting a room to help cut costs? Keep in mind if you plan to buy something bigger than what you currently rent, your utility costs will most likely be higher.
5. Can I see myself living in the same place for the next five to seven years?
When it comes to buying a house, a good rule of thumb is to think about if you’ll be there for five to seven years. If so, buying can be a smart move: If you hold on to your home for a while, it can be a great investment, especially if you make improvements that increase the home’s value.