According to Maslow’s Hierarchy of Needs, the need for shelter is one of the primary requirements on the way to becoming self-actualised. While rent and living under the roof of our parents fulfils that requirement for many years of our life, most of us desire to become home owners as soon as possible. However, with a wealth of financial woes and insecurities being reported in the market, how do we know when exactly the right time will come for us to purchase our first home? There are two sets of factors and stages that will determine whether the time is right for you to purchase your first home; Internal and External.
You and Your First Home
In regards to internal factors you need to make sure your financial house is in order before you consider buying external real estate. Have you saved enough money to be able to make the deposit for the necessary home loan? Most home loans require first time buyers to make a substantial deposit, often in the region of 15-20% of the loan principal. Secondly, do you have the additional disposable income to cope with the monthly expenses of being a home owner? Costs that are often forgotten are those of property tax, maintenance fees that are required to make to the property, any possible levies and other fees as well as homeowners insurance and utility accounts. Costs, such as these, are often included in your rent previously paid, but as a home owner will be separate charges that you need to cover. With the financial aspects in order, are you emotionally ready to become a homeowner and settle down in an area? Often an overlooked factor, maturity can be a substantial variable in purchasing your first home.
Home Owner Market Factors
External factors are those of the market and the property available for purchase to first time home buyers. Finances that are available to first term buyers fluctuate according to lending stipulations and with high interest rates, the barrier to lending may be too high for many young professionals. Property markets also play a large factor, and whether you can afford to purchase property in an area that you wish to live, and whether in the long term the prices of the property will decline, making it a poor investment should you wish to sell later. Making sure that you are on top of market trends and that you are able to make the most of the external factors to your benefit will be a deciding factor in taking the plunge.
If you have your first time property buyer internal and external factors in order, get all your documentation together and buy property with your head and not your heart.
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Alan Stoker is a financial advisor with a background in personal lending and property investment. Having authorised many home loans to young professionals, Alan prides himself in understanding his clientele and what they need to make sure that their investments offer returns. His blogging is an extension of his passion and desire to assist people in making the most of their personal finances.