Can you afford the monthly mortgage and its components? Generally, a mortgage payment is made up of loan principal and interest (both amortized over the life of the loan) plus homeowner’s insurance, property taxes (prorated), mortgage insurance (if you put down less than 20%), and HOA (homeowners association fees). These items can easily affect the monthly loan payment by several hundred dollars. Are you emotionally ready? Can you handle the stress? A big factor to consider when buying a home is the stress that can come with large financial decisions. The Holmes and Rahe Stress Scale, a landmark stress study, ranks many events that go along with buying a home in the top 43 most stressful circumstances in life. Four events are specifically home-related: change in financial state (No. 16), large mortgage or loan (No. 20), change in living conditions (No. 28), and change in residence (No. 32). If someone has recently made other life changes, such as marriage (No. 7), switching careers (No. 18), or having a child (No. 14), it might be wise to postpone buying a home. Stress overload can lead to missed payments, which can result in destroyed credit or even losing the home. It’s better to rent if your life is in flux and then buy when your stress levels are lower. Are you ready for commitment? Are you ready to make a lot of decisions, from picking a real estate agent to picking paint colors? Are you confident enough to choose a neighborhood where you believe home values will continue to appreciate and that will serve your needs (i.e., proximity to schools, shopping, recreation, etc.)? Are you ready for devoting the time and attention to maintaining a home (i.e., leaf-raking, grass-cutting, appliance maintenance, repair, etc.)? Taking care of your biggest investment can be gratifying, but only
28
Powered by FlippingBook