Five Financial Questions to Ask Before Buying a Home

Five Financial Questions to Ask Before Buying a Home

Buying a home is a dream for many, but not every dreamer is fully prepared financially. The reality is that buying is not always better than renting— no matter how many times you may have heard otherwise.

How do you know if buying a home is the best financial decision for you? Here are several questions to ask yourself before you make the big leap:

1. Can you put 20% down? This is very important because it gives you financial flexibility and a lower interest rate. Plus, you’ll have a better chance to avoid paying for private mortgage insurance (PMI), which insures your lender if you default on your mortgage.
2. Do you have additional savings for furnishing and maintenance? Buying a home is certainly half the battle, but the other half is furnishing, decorating, and maintaining your new place! Be sure to avoid a financial situation where you don’t have enough funds to cover routine maintenance the inevitable unexpected maintenance emergencies.
3. Where’s the location? An often-overlooked financial question is whether the location makes your home purchase a sound investment while you live there and also when you choose to sell. Is your home close to work so that you can save on commuting costs and childcare hours? How close is your home to the grocery store and your favorite clothing shop? Is the area safe? How are the schools? It’s important to know the ins and outs of your location before buying a home. This is where a realtor can help.
4. How long do you plan on staying? In general, it takes at least five years to break-even on the costs of buying, owning, and selling a home. The longer you stay in your home, the better your chance of making a profit when you sell.
5. What type of insurance will you need? Regardless of whether you decide to buy or rent, you need insurance to protect both your home and your valuables. The Alumni Insurance Program offers both Homeowners and Renters insurance that can cover you, no matter where you choose to reside.