Three Essentials When Buying Your First Home

August 9, 2019
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Around 52% of adult Americans have money in the stock market, but it’s not the most popular investment in the nation. That title goes to home ownership, with 64.2% of households being owner occupied.

In a recent survey conducted by Bankrate, house ownership was found to be the most desired investment of 2019.

Owning a home is not quite as glamorous as investing in stocks. The return is focused more on lifestyle and long-term financial stability. The stock market provides an average annual return of 10%, but the risk is high. If you’re concerned by the volatility in the current market and are yet to purchase your first home, now could be the best time to work towards your goal.

Here’s what you need to consider before buying a home.

1) Don’t Worry About Short Term Returns

There’s no getting around the fact that stock investment is exciting. The prospect of a strong return in a relatively short time period, combined with data that can be tracked in real time, has made stocks more popular than ever before. The market is massively different. Returns can sometimes take years to materialize.

If you are considering a home as an investment, you should expect to wait five, seven, or even ten years to see appreciation.

2) Weigh the Value of Home Improvements

If you purchase a pre-owned home that needs work, you’ll need to carefully think about each improvement and the value that it will return. Most experts agree that you shouldn’t invest in improvements that won’t return at least 1.5x their value at resale.

Kitchen remodeling, exterior finishing, and added living space are all examples of high-return home improvements.

3) Don’t Settle for the First Loan You find

You need to shop around for a home loan that will improve your return at resale.

The type of loan you can get will depend on several factors. Your credit history, income, and the value of the property you buy will all be important. Outside of loan approval, you should also consider the risk that you are willing to take. A 30-year fixed mortgage might look attractive today, but with an inflexible loan you could lose out if interest rates are slashed in the future.

If you are eligible for a VA loan, HUD loan, or even an FHA loan, then you should consider these for the competitive interest rates and relaxed lending criteria.

More Than a Financial Investment

A home is more than a fiscal asset. Getting on the housing ladder can create security that lasts right through to retirement.

As with every financial decision, consider your options carefully, keep affordability in mind, and think long-term before investing in your first home.

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