Home Buying 102 — Setting Goals

Answering these 6 questions will set you up for home-buying success.

Is it time for you to take that giant leap into homeownership? Before you spend hours cyber-stalking your dream home, take a few minutes to identify your priorities.

• What do you want the house to do for you? Is this a way to build some equity and stop paying rent? Do you need more space for your growing family or growing business? Is it time to simplify and right-size? Knowing how long you expect to live in the home can help you be more strategic about your purchase. For example: if you expect to acquire a bigger, better house within a few years, buying in an area with a strong rental market can give you more options when you’re ready. If the market prices are low when you want to move, you’ll have the option to rent your current place. To find out the strength of the rental market, you can ask your real estate agent or search a website, like Realtor.com, to see the average days that apartments are on the market before being rented. In general, less than 30 days is a strong market. There are lots of variables, though, so try to compare units that are similar in size and location to the ones you’re considering.
• How big? The easiest way to figure out the ideal size is to examine your current digs. If you live with your parents in your childhood bedroom, you might think you can be happy just adding a kitchen and living room to that footprint. But don’t forget the stuff you have in the basement, attic, garage, etc. Also remember that your life may be different when you’re on your own. My friend, Susan, needs a whole closet just for holiday decorations! Do you ski? Kayak? Cycle? Play hockey? Collect Star Wars figures? All of these things take space, so remember that when you’re house hunting.
• Where? It’s normal for people to look for a home near where they live now or where their friends are. That can be emotionally satisfying, but make sure you don’t limit yourself. If you can, take a tour of your region. Spend an entire weekend in each of the towns within a 20-minute drive of your current home. Try out restaurants, walk and drive the streets, window shop, strike up a conversation with someone working in their yard. Try to get the vibe of the place…it may be different than what you thought you knew about the area. One Boston suburb used to be all about young, single people who were active and outdoorsy. Based on those ideas, you may buy a condo there only to discover that these single neighbors you thought you’d meet and join on biking tours of France have now paired up and are having kids. While you may love your neighbors and their adorable kids, you won’t achieve the single-person lifestyle you envisioned. Do you know that you want to live in the city? That’s a great choice for some — no commuting, tons of places to eat, go-and-experience attitudes — but realize that you’ll likely sacrifice space inside and out compared to what you can get for the same money in the ‘burbs . Remember also that people generally move to the ‘burbs to get more space and have the growing families that demand it. I love my house and its location but have nothing in common with my neighbors, so I’m missing out on the kind of warm, neighborhood feeling I’d have if I lived elsewhere.
• How much? You should have some idea what monthly payment is comfortable for you — maybe it’s the rent you pay now plus whatever percentage you’ve been saving for a down payment. Maybe you have a monthly budget that you don’t want to exceed. When you talk to your loan officer (see next week’s blog for more info on that), he or she will tell you how much the bank will lend, which might feel like a comfortable monthly payment. So it helps to think through your budget before you get romanced into a too-high mortgage.
• Amenities — Do you need a garage? Is a dishwasher or second bath on your list of must-haves? Itemize what you’re not willing to sacrifice and make sure that all of those things are part of the initial search. If you don’t find enough homes in your price range, you can always remove some items and look for homes that will let you add them later. Do that strategically — adding a dishwasher is easier than adding a second bath, which is easier than adding a garage — so remove the dishwasher requirement first, etc.
• Use your crystal ball — Even if you buy to then sell in five years, something may change, making that impossible or unattractive. It’s great if you can buy a place that has future options. For example, if you know you’ll need more space in 5 years, buy a house that would allow an addition or an expansion into the attic. You can buy a single-family home in an area zoned for 2-family; if you can’t sell when you’re ready to move, you could convert to a 2-family and rent the units, or sell them as condos. The more options you leave yourself, the better off you are.

Use a spreadsheet or even graph paper to track your goals. and remember to check in with these aspirations each time you think you’ve found The House. This may seem obvious, but believe me, buying a house is such an emotional experience that you can lose all reason. I sometimes have to point out to clients that there was virtually no closet space in a home or that the house needed a lot of maintenance. It helps to have a real estate agent or even a family member by your side to help keep you on track. Let me know how I can help, and tune in next week for a new installment: Getting Pre-approved.

As always, thank you to Carl Zukroff for getting rid of those nasty to be’s and gerunds!