What’s the 5-Year Rule in home searching?

It seems that, in the world of Northeast PA real estate, the tides could once again be turning around from renting a home to home ownership. And, I think we can probably thank lower home prices and mortgage rates that are at an all time low for the shift.

And, if you’re considering searching for your next Northeast PA home and are doing your own “what’s my monthly rent vs. a mortgage payment minus the tax savings gonna be” calculation, many financial advisors recommend that you consider this rule of thumb as well…. you should plan to stay in your new home for at least five years.

 While these transaction costs are only one consideration that makes this a good idea, here are some of the others reasons why it’s prudent to think about the 5-year planning horizon as you conduct your home search:

I’d like a little financial security!. Every homeowner knows they need to have some extra funds set aside for an emergency just in case there is some unforeseen loss of income. Affording a home and its maintenance costs should never jeopardize the financial health of your household.  Liz Weston of MSN.com recently asked several experts for their calculations regarding home repairs. Their answer? Plan to spend at least an additional 1% of a homes’ value on maintenance each year.

What about the resale value? – There’s still a significant amount of “distressed homes” and the trend  will likely continue to exert at least some pressure on home values for the near future. If you need to sell your home two or three years down the road, you may come up short when all the moving, transaction, and other expenses are considered and it may be at least that long before the familiar growth in residential real estate value resumes.

How about my own sanity! – Studies have shown that moving is one of the top stresses in life (up there with death, divorce and illness). Personally, I think a well-planned move is a little less dire, but it is true that a happy homeowner is a settled homeowner.  When you’re starting your home search, consider the changes coming to your family in the coming years: New baby?  Child to college?  If you know a move is eminent in the near future, consider finding a home with long-term rental value.  Buy a home that can grow with you and you’ll find yourself much more financially secure…and sane!

The current low prices and 30-year fixed mortgage interest rates aren’t likely to last forever, and that old adage remains true: buy low, sell high.  If you’re looking for a reason to start your home search in the area now, call me for a serious look at this June’s market.  

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A few things to think about when beginning your New Home Search

Before you begin your new home search it’s very important to create your own “reality shopping list” that will help you prioritize your choices because looking for a home is a very time-consuming activity, especially if you have not properly narrowed  what you need vs. what you want.

Ask yourself, do I NEED:

v  A specific number of square footage for comfortable living?

v  An eat-in kitchen?

v  Garage or basement for storage needs

v  Proximity to a specific school

v  All living areas on the first floor for health reasons?

Then ask, do I WANT:

v  A pretty view

v  Skylights

v  Carpeting colors or wood floors

v  Pool

Make sure to differentiate between the two and create the goal that emphasizes both criteria yet remains inside your budget.  Once you have a clear view of what your next house has to have, the job of finding the right one will become easier!

Equally important is to focus, as specifically as possible on these larger questions:

  • Why am I buying a new home?
  • What area do I really want to be in?
  • What do I want my home to be close to? Urban, country setting?
  • Is neighborhood stability a priority?
  • How much space do I need and why?
  • Which is more critical: location or size?
  • Would I be interested in a fixer-upper?
  • How important is home value appreciation?
  • Would I be interested in a condo?
  • What features and amenities do I want? Which do I really need?
  • What type of home am I looking for?
  • What are the schools like?

Once you are pre-approved and ready to begin your search, how or where do you begin? There are a lot of homes out there and diving in without a guide can become overwhelming and confusing.  A great agent will help you more accurately pinpoint homes that fit your criteria. The right home will meet all your important needs, and as many of your additional wants as possible.  Give me a call and I will be your guide through this challenging but exciting journey!