Residential real estate has been a smoking hot market across the country during the last year plus. It has a lot of people wondering, is now a good time for me to buy? In this Money Hacks episode, Alex shares some key considerations, potential risks, and how to get the home buying process started. Buying a home is one of the biggest financial decisions you can make, so be patient and do your research. We hope this video can help you get started when the timing is right for you.
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Video Transcript:
Hey, it’s Alex with AFS 401k and it’s episode # 82 of Money Hacks. Everybody is buying a house! should I buy one? Home buying is one of the biggest financial milestones that many of us in our journey and our financial life, and it can certainly be a stressful, emotional, but also very fun process. The goal of this quick video is not to talk about what’s driving home prices necessarily, but more so the key considerations and action steps you want to consider if you’re going through that home buying journey.
These are a couple of the things that I would recommend when it comes to buying a house. I think foundational ideas around home buying are that if you’re buying a new home you want to have a high degree of confidence and probably that you’re going to live in that house for somewhere around 7 to 10 years. Now, there are certain scenarios where after a couple of years, the home’s value has gone up significantly and you can make money by moving on to your next home. But concerning real estate and residential real estate, as an asset class, you know, you need a longer time horizon 7 to 10 years for it to make sense financially, to buy a house and live in that house before moving to another place. So that’s step number one- are we going to be in this place for a 7-to-10-year period?
Next, do we have an ample amount of savings to cover some of the initial costs of home buying? Now, the obvious ones are the down payments and closing costs, but there are other additional costs, such as the moving expenses, any initial repairs, or upgrades that you want to do. So, you want to make sure that you have an ample amount of money saved up to cover those initial costs, but then the ongoing maintenance and upkeep costs of buying a home. Make sure you have somewhere around three to six months’ worth of emergency savings to create that cushion for financial security. When you are a homeowner the importance of emergency savings is amplified because you have certain expenses, perhaps you need to replace your water heater or in my case, a couple of weeks ago, we realized we had a leak in our cooling unit and had to get a repair, so those things happen and as a homeowner, you need to have that cushion to pay for them.
It’s certainly you know, a tough environment for somebody who wants to buy a house and the property just seems to be flying off the market. I would encourage you to have patience buying a home, buying your first place, or a new place can be a very emotional buying decision. You want to make sure though you’re setting yourself up for success financially.
So early on in the process, as you start to explore the idea of purchasing a property, purchasing a primary residence, I would encourage you to build a relationship with an expert and reputable mortgage banker or mortgage broker to help guide you through that, the home buying process, the financial components of it, along with the ongoing mortgage payments that you’ll be making across the next 20 or most likely to 30 years and understanding those different types of options.
You want to make sure that you’re being very thoughtful around getting the place that’s right for you and your partner or spouse or family or roommates for the long term and periods like we’re in now sometimes, you know, you can get caught up in that process of needing to get to a place before they’re all gone. You know, FOMO kind of a thought process, and I would certainly encourage you to take a step back and, and think about how you’re making the right decision for the long term.
So, if you have questions or if you have tips about home buying or the things that you did as you went through this process, whether that was recently or a few years ago, please feel free to share them with us on this post, send us your thoughts, or questions, and hope this video helps. We’ll see you next time! Thanks!
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