Buying a home is one of the most important decisions you'll ever make. But it's easy to get so caught up in the excitement of it all that we can quickly lose sight of what's important. Things like sticking to a budget and waiting for the right time can go out the window when a realtor shows you granite countertops and a lender says you can borrow even more than you asked for. So how can you reign in the excitement in order to make a decision that makes sense for your life and your finances? Here are a few things to help you get started:
Find Out How Long You'll Be Staying
Military life is anything but predictable sometimes, so there are added risks of buying a home if you or your spouse is in the military. The very first thing you should find out when deciding when to buy a home is how long you'll be staying in your current location. Where are you stationed? Is there a chance of a permanent change of station happening in your future? If so, will the whole family be going? Aside from that, are you nearing retirement? If so, is your current location the place you want to settle down? Or might there be other cities or communities that would work better for your post-military life?
When finding out how long you'll be staying, make sure you're keeping a realistic view of what makes sense as opposed to your desire to become a homeowner. Even if you're staying for five years, that's only ⅓ or ⅙ of the life of a typical mortgage. If you end up having to move away while still having so much of a mortgage remaining, that could put you in a very tight position. Even though it may feel like renting is throwing money out the window, selling a home before it's paid off involves a lot of variables. For example: how much time you have before you must sell and the state of the economy at that time (which affects your home's value and the likelihood of selling). If either of these are working against you then, your new dream home could become a ball and chain that you can't get rid of a few years from now.
Evaluate the Stability of Your Employment
The next thing you should do is evaluate the stability of your job, and thus the stability of your income. Of course, none of us can predict the future, but there are ways to determine if you'll be making the same pay (or more) a few years from now. Here are a few things to consider:
If you're the military member:
- How long will you be on active duty?
- Do you have a plan for employment when you retire?
- If you're retired, see the last four bullet points in the list below.
If you're the military spouse:
- Would you be able to work remotely if your spouse is reassigned to a different post?
- What's the projected health of your industry in this location and others?
- What's the health of your company?
- Will you be switching to a new job or new career field in the near future?
- Are there opportunities for you to move up in your field or are you at the top of where you can go?
Since a mortgage is such a long-term commitment, then it's important to know if you'll be able to handle that commitment both now and 20 years from now. There certainly are no guarantees so you don't need to be 100% sure before you take the leap into homeownership. But the more prepared you are, the better, so you can prevent the stress of dealing with debt while unemployed.
Map Out Your Present and Future Financial Situation
The final piece of the puzzle is to map out your present and future financial situation. What do things look like now and what do you think they'll look like in five, ten, twenty years? I always prefer to be very conservative in my own projections to provide myself a cushion in case things change unexpectedly. Then, finish the puzzle with an emergency plan. Aside from your job stability and income, an emergency plan is vital if you're going to become a homeowner. There are so many unknowns homeowners encounter, even if a home passes a perfect inspection. On any given day something could break and you'll need a strong insurance plan and emergency plan to make sure you're covered. So look at your emergency plan now and decide if you honestly feel comfortable with that being your cushion. If you're not that comfortable with your emergency plan, then plan out how long it will take to get it to a better place and make that a strong consideration in your countdown to homeownership.
Once you've answered these questions, you'll be able to determine when exactly is the right time to buy a house. Whether the answer is "Right now!" or "Hmmm, probably not for a few more years," keep in mind that you've just taken the most important first steps! Even if you have to defer your dream of homeownership for a few years, there are plenty of ways you can optimize your finances now so that, when you do buy a home, it will be the home of your dreams.
