Buying a home is a big deal! It’s an opportunity to start fresh in a new place and build the life you imagined. There’s lots of excitement about what could be. But it is also a time that can feel overwhelming since it may be one of the largest sums of money you’ve ever dealt with.  The decision requires a thoughtful approach. And it important to weigh all the practical matters of home ownership against all that emotion! Let’s focus on a few of the most important questions when buying a home.

Do you know what you need vs. what you want?

Forget about your budget and numbers for a moment – and ask yourself (and whoever you are purchasing it) – what do you need? What do you want? Are you allowing for your life to grow into that home? Or is this temporary space until your family grows? Is it reasonable to think you may move with your job soon?

The reason to reflect on all these questions –among others—is that buying a home with the intent of staying in it for something less than two or three years doesn’t make much financial sense. The real monetary benefits of home ownership usually don’t kick in until after you’ve owned the home for a longer time.  Set yourself up for success by knowing to the best you can that you will be in your new place for more than a few years.

Do you know all the upfront costs of buying a home?  

Remember it will cost you more than your down payment to purchase a home. Legal fees and other closing costs are usually about 3-4% of the purchase price. Some are included in your mortgage loan amount, but don’t forget to add in all the other costs too: movers, any renovations or clean-up you want to do or furniture you need to buy. It’s all incremental and cash you will need to cough up. If you are buying a $500,000 home, you might find you need an extra $10,000 to cover all the things you need or want at the outset. When the dust settles, you still want to have adequate safety funds in your bank after all this spending – so be sure to know the costs in advance.

Can you afford the on-going costs of home ownership?  

Not only do you need to know the upfront costs, but you must do an honest accounting of ongoing home ownership costs! Just because you can afford to purchase a house doesn’t mean you can afford it on an ongoing basis.  An affordability analysis will put you on sound and sustainable footing for your new home.  Be conservative and make a list of everything the home will cost each month from the mortgage payments (here’s my mortgage calculator) and property tax down to the utility costs and yard work.

Are there any big improvements you know will come up? Need a new roof or kitchen? Understand these items and budget for them. You might find you can afford to purchase the house, but not maintain it. There’s nothing worse than moving into your dream home, only to feel a sense of dread at your depleted savings and monthly bills. Before you sign on the dotted line, do the math!

We all need a place to live and the experience of buying a home should be a positive one. Answering these types of questions above will help put you in a better position when making your decision. Have fun with the process and do your homework ahead of time – then enjoy all the amazing parts of home ownership.  I’m here to help with any questions like these, so please reach out!

Jim Marrocco, CFP®, CFA

Jim is a financial advisor and owner of Thinking Big Financial, Inc. Thinking Big Financial is a fee-only registered investment advisor offering financial planning and investment management services. Specializing in working with the LGBTQ Community.

Please read my legal disclaimer here.