Are you considering buying a home? You’re not alone. In 2020, 84% of Americans reported that buying a home is a significant priority in their lives. Furthermore, nearly 100 million Americans plan on purchasing a home by 2025.

It’s clear that homeownership is a universal dream. However, it’s one that should not be taken lightly. A home is probably the biggest purchase you’ll make in your life. It will determine your finances for decades to come. Homeownership can be a wise investment—or a financial disaster.

If you’re planning on purchasing a home, read on for 4 things to consider first.

Will you apply for a traditional mortgage?

Unless you have enough cash to purchase a home outright or a connection who will offer you a personal loan, you’ll want to explore your traditional mortgage options. A mortgage is a type of loan that uses your house as collateral. You’ll be expected to make regular payments on the cost of the loan plus your interest rates over a determined period of time. If you don’t follow the terms of your loan, your house may be foreclosed on.

When it comes to your mortgage, lenders will look to a few different things when determining your eligibility and your terms. For one, they’ll look to your income. Be prepared to show several months of income statements or a year or two of bank statements. They’ll also look at your credit score and your debts, so get those in as good of a place as possible before applying.

Do you qualify for financial assistance?

If you’re a low-to-moderate income individual, you may qualify for financial assistance in the form of a CalHFA loan. With traditional mortgages, the borrower is expected to put a lump sum down payment on the house, and then pay off the rest of the cost using their mortgage. For many who are low-to-moderate income earners, the down payment is the number one barrier to purchasing a home.

CalHFA is a financial agency that offers financial assistance to these individuals in the form of a second or subordinate loan. This type of loan is typically used to cover both down payment and closing costs on your home and is borrowed in tandem with a traditional home loan. Subordinate loans from CalHFA are zero interest and you won’t be required to pay them until your traditional mortgage is paid in full.

Will the house suit your future needs?

A common mistake that first-time homebuyers make is purchasing a house for the life they live now, and not the life they plan to live. Consider this: is your home a stepping stone, or is it a place you plan to live for years to come?

If your answer is the latter, make sure you’re purchasing a home that will suit your needs down the line. Do you plan on having children? Do you plan on moving an elderly parent into your home? Is there room for these needs? What is the neighbourhood like? Are there good schools nearby? These are all things to consider if you plan on living in your home long-term.

Does the house have good bones?

In today’s housing industry, there’s a significant trend towards fix and flip homes. You’ve probably seen these on TV. Flippers will purchase older homes, do superficial repairs that look expensive, and then sell the home for a significant profit.

The problem with this model is that it often disregards significant issues with the home. Older homes have simply been around longer and therefore are more susceptible to foundational and structural issues. A beautiful facade may be hiding irreparable damage underneath.

For this reason, it’s important to use a trusted home inspector to verify that the home is up to snuff. Talk to friends and family, do research on review sites, and check with national home inspection organizations to find a home inspector that knows their stuff.

By carefully weighing these four factors, you’ll be set up for success when buying your new home.

Related posts:

Simple ways to determine how much house you can afford Reverse mortgages and how they work Family first: important things to consider when buying a home Successfully buying your first home