Price is the chief influencer in almost every purchase we make. Regardless of how much we may like something, if we are not comfortable with the price we have second thoughts. This is magnified when buying your first home. It is an old cliché but buying a home is the biggest financial commitment you will ever make. In most cases you are on the hook for the payment for the next 360 months. As important as price, and affordability, is when it comes to your home it should not be the only consideration. There are a handful of additional items that will directly influence your enjoyment in the home. Here are four things to consider, in addition to price, when buying your first home.
Neighborhood. The average time spent in your first home has shifted over the years. Last decade you could anticipate being in the home for roughly seven to ten years before looking elsewhere. Today, the number has slid to five years. Even taking the low side you will still be in the home for at least sixty months. During this time, you should be comfortable with the neighborhood. If you are on a busy street and have a tough time getting out of your driveway in the morning it won’t get easier over time. If there is excessive noise or traffic, it will remain busy for the foreseeable future. The price may allure you to the property, but you need to envision yourself living there for years. If the neighborhood is a problem when you buy, it doesn’t change once you take ownership.
Schools. A majority of first-time buyers over the course of their ownership think about having children. With that, there is the eventual thought of where they are going to go to school. Some towns have multiple schooling options, while some are much more selective. This is especially the case when it comes to nursery school and kindergarten. You don’t want to move out just a few years after you got in because the schools are poor. Quality and abundance of schools shouldn’t be your first consideration with a new home purchase, but definitely something to think about.
Taxes (Demographics). There is a lot that goes into a new home purchase. It is easy to talk yourself into and out of almost every property you look at. A hidden factor in any property’s affordability is the taxes. Look at where the annual tax amount has shifted over the years. In a stable market, there isn’t much of a change to the mill rate and ultimately the annual amount. However, in financially unstable towns there will be a slow shift to higher taxes. It is not inconceivable for the taxes to rise by thousands of dollars over a five-year period. This will increase your payment hundreds per month. Talk to your real estate agent about the strength of the town and where taxes are trending prior to making an offer.
Long Term Outlook. In the past, you first home was considered a way of forced savings. You would pay your mortgage every month and use the proceeds from the sale to use as a down payment for your next home. With the concept of a starter home slowly fading away, this mentality has changed. As much as equity and future appreciation are moving targets, it is something that should be considered. You want your home to be in a market that has some upside. This can be created by improvements you make, but also with demand for your area. Without that you can expect your property value to remain flat for the foreseeable future and be disappointed when you decide to list your home.
Getting into your home and being comfortable with the payment are obviously important, but not the only factor. Think about these four items before moving forward with your first home purchase.