Visioning Homeownership – Part 2 of 4

Things to Consider When Buying a House

If you are buying a home by yourself, then you only have to consider your needs when listing what you want in a house. However, if you are married or planning to marry, you may need to create a list of priorities and discuss which are necessities and which are luxuries.

In order to be cost-effective, many people are choosing to buy a house with a friend or with family members. Some questions you may want to ask yourself before you buy your home include:

  • Do you want to buy an asset that has the ability to appreciate in value?
  • Are you financially ready to buy a house?
  • Does buying a home align with your financial goals?
  • Do you foresee any concerns with owning a house with a partner or family member over the long term?

Buying your first house causes you to take a deep look into your finances to determine if the type of house you are seeking fits in line with your financial goals. Remember, features, location, and individual needs should be considered in the process.

 

Features & Location

The two most important factors in buying a home are the features you want and the location of the property. Features that most people look for include:

  • Number of bedrooms
  • Number of bathrooms
  • Kitchen layout
  • Age and condition of the appliances
  • Location and size of the lot

Real estate’s value is commonly determined by 3 factors: location, location, location. Proximity to employment, education, recreation, family, and friends are all factors you’ll need to take into consideration. It is also important to understand that there is different pricing within a state and different areas of the country.

Example: A townhouse downtown in any major city will typically have a much higher price tag than a house in a small town in a rural part of the same state.

Types of Property

There are many types of properties for you to think about when looking to buy your first home. Weighing out what you value now, what you’ll value in the future, and your long-term financial goals are all important considerations when choosing a type of house to purchase.

Remember – You want to own the house, you don’t want the house to own you. So let’s look at the types of housing properties available to homebuyers.

  Traditional single-family properties are an individual building that are typically owner-occupied. There are countless styles of single-family homes that vary throughout the country, and the world for that matter. Factors to consider in addition to the location are size/square footage, number of bedrooms, and bathrooms. Additional features that differentiate properties include: the style of the building, finished vs unfinished basement, outside deck and/or fenced in yard, as well as size and location of the garage.

   A condominium is still considered a single family home, and may be a  next step for those who have been renting or an option for downsizing for a retiree. Condos have an element of ownership while distributing the costs across multiple owners for shared major expenses. Often described as units, a condominium may have shared walls with neighbors or a common area that is shared, such as a lobby, pool, clubhouse, or land that can be used for recreation. Advantages of a condominium are the low maintenance, and certain expenses are shared.

Condominiums typically have an Association that oversees each condominium unit. There is typically a board that makes decisions on maintenance, landscaping, and capital improvements, and is also responsible for overseeing that by-laws and rules are administered. Condominiums typically require a Homeowners Association (HOA) payment that covers the expenses of the association and the properties.

  A multi-family property has separate living areas for multiple families. This provides the opportunity to earn income from the property you are living in by renting out the additional unit(s). It also provides the opportunity to share maintenance and repair costs with friends or family. Other names for multi-family properties are In-Law apartment or Additional Dwelling Unit (ADU), which are both typically a two-family house. The In-Law or ADU is typically a smaller space that was built onto the larger original structure.

1-4 family properties still qualify for the same financing from the bank that you would use to buy a single family house. You can apply for a mortgage for a multifamily home from a bank, credit union or mortgage lender, just as you would for a single-family home. Anything over a four family unit would be considered commercial and generally requires more down payment money and less favorable loan terms.

   A modular home is completely constructed in a factory and then transported to a site. Once the home arrives at its destination, it is indistinguishable from site-built homes. This allows the entire process, start to finish, to be overseen with   consistency and accuracy, which cuts down on many of the delays and disruptions in traditionally built homes.

Modular homes are significantly more affordable than site-built homes. The primary reason that these homes are constructed in one place is that it allows for controlled production costs. They are constructed inside a factory and therefore are also typically constructed in a fraction of the amount of time for a site-built home. Modular homes can be placed on a concrete slab, crawl space, or foundation.

  Manufactured homes are also built in factories, but are governed by federal or local state building codes. Manufactured homes are either built on a permanent chassis or on a temporary one. The home is assembled at its destination site. Unless you own the land, you will need to pay a rental fee to the owner of the land where you set the home.

Some lenders will not offer financing for manufactured homes, so you may have to seek alternative financing or pay cash. Many manufactured home dealers offer financing similar to auto loans through an automobile dealer.

Home Inspection

Prior to closing on a new home purchase, it is strongly recommended to get a home inspection. A professional home inspection will make you aware of the condition of the house. The roof, heating/cooling, electrical systems, presence of mold, asbestos, and other harmful items you’ll want to know about before moving forward with a house purchase.

An inspection is often a contingency you can require as part of an offer on a house. If working with a Real Estate Agent, they can provide you with more information about who to use and what to look for in the inspection report.

Depending on the type of loan you use, there may be multiple inspections required. You have the choice to hire a professional inspector to make you aware of the condition of the property, and you can also do a personal inspection. When using FHA Loan, the house must have an FHA inspection for safety and value. We will look at different types of loan conditions in another section.

 

A Journey to Personal Financial Success

At Morgan Franklin Fellowship (MFF), we support the concept of financial freedom – by teaching participants how to save by paying themselves first, invest for their future and grow their net worth.

Learning how money works and how to talk about money with others are the first steps towards recognizing an individual’s lifelong financial goals. Our online programs, podcasts, blogs, and book reviews and resources are designed to help you learn the concepts, rules and vocabulary of money, finance and investing.

Becoming an MFF Fellow

Our Standards of Financial LiteracyLearning about money series is engaging, full of interesting information, and easy to navigate. Adapted from the National Standards for Personal Financial Education developed by the Council for Economic Education (CEE), this robust curriculum features six short lessons on such important topics as earning income, understanding the value of saving and using credit. When completed, this program lays the foundation for becoming an MFF Fellow.

Becoming an MFF Fellow is the ticket to access additional MFF programs and opportunities for mentoring, networking, internships and real-world opportunities. Hear from the MFF Fellow themselves on how these opportunities encourage them to continue their journey to personal financial success.

Learn More about Money

Begin the journey towards personal financial independence today. START LEARNING TODAY

Like this article?

Share on Facebook
Share on Twitter
Share on Linkdin
Share on Pinterest