For many people, buying a home is one of life’s biggest milestones. The feat can bring plenty of benefits—from building equity to allowing for stable and predictable housing costs—but the journey to home ownership can often feel overwhelming.
From understanding mortgages to locating resources for financial assistance, there’s much to consider before turning the key to your new front door. To help make sense of it all, The Daily spoke with Jonathan Ernest, assistant professor at Weatherhead School of Management.
Ready to take the next step toward owning your dream home? Whether you’re a first-time buyer, considering upgrading, or simply planning for the future, read on for Ernest’s advice on navigating the home-buying process.
Then, take a look at Ernest’s insights in a recent article by Salon magazine on long-term interest rates.
It’s always smart to plan ahead.
Even if you don’t plan on purchasing [a home] for a few years, saving and investing wisely can help you have a larger down payment and decrease the size of a loan you may need. Keep in mind that taking steps to build your credit now can help you qualify for a better rate on your mortgage when you do eventually make that purchase.
Home ownership comes with maintenance and upkeep, insurance and other costs that may be lower when you’re renting.
Buying a home is a reasonably complicated process, and many prospective home buyers fail to take into account all of the fees and costs associated with owning the home. If you only look at the cost of the home itself when setting your budget, you may overextend yourself after having to cover utilities, yard maintenance, or snow removal during these cold winters like Cleveland’s. Planning ahead and setting aside extra funds for unexpected repairs can help ensure you’ll be able to make those mortgage payments without breaking your budget.
Mortgage prices are high compared to recent years, but low compared to some periods in U.S. history like the 1980s.
Many homeowners are reluctant to put their homes on the market and give up their lower interest rate mortgages, so prices may stay elevated for some time. As mortgage rates eventually fall, we should see more of these homes make their way onto the market, but we may also see an increase in demand which would help keep home prices higher.
When mortgage rates are high, housing prices may be depressed, as the overall cost of owning a home is higher.
Don’t buy a home that you can’t afford in the hopes of lowering your costs if mortgage rates drop significantly in the short run. But, don’t be entirely dissuaded from purchasing a home with a 30-year mortgage without considering that you may be able to refinance in several years to lower your rate and payment.
Shop around to be sure to find a lender that offers a favorable rate for you.
See if any “price lock” guarantees are in place to limit last-minute increases that would make the home of your dreams unaffordable, and complete as much ground work as possible so that you can proceed quickly and effectively if rates fall and a great opportunity presents itself.
Consider location. Cleveland is a large and diverse city, with many opportunities to find a home that suits your needs.
You may want to broaden your search among localities, as taxes and amenities can vary significantly depending on where you locate. If you get a job across town or want to enroll your children in a particular school district, you’ll want to carefully consider your current and future needs as you progress through your housing search.