Five Rules for Buying a House

The USAA Educational Foundation

Buying a house is a great way to feel like you’re part of the community. But it’s also a huge financial decision with far-reaching implications.

If you’re looking to buy soon, here are five rules you’ll want to follow:

Rule 1. Have an emergency fund.
Homeownership comes with an almost never-ending supply of expenses; and many of them are unexpected and large. To avoid unplanned debt when they occur – and they will occur – be sure to have some money set aside. A good goal is 3-6 months’ worth of your committed expenses in most situations.

Rule 2. Create and follow a spending plan.
Home buying doesn’t just mean swapping a rent payment for a mortgage payment. There are a lot of other ongoing expenses you’ll have to pay too. You’ll have real estate taxes, homeowner’s insurance, utility bills, and maintenance and repair expenses among others. Also, since you'll be taking on a mortgage, you may need to buy more life insurance.

Rule 3: Save up a big down payment.
Even if you can get a loan that allows you to get by with little or no down payment, making a down payment (or at least having the money available) is typically a good idea. This way, if the real estate market hasn’t been kind by the time you need to sell the house (PCS anyone?) you'll have less risk of becoming an unintentional landlord.

Rule 4: Have confidence in your job security.
Household expenses consume more than any other expense category for many homeowners. Add in the long-term commitment of owning a home and the need for job security becomes pretty clear. Two-income families should try to limit their home purchase to a house that is affordable on just one income, if possible.

Rule 5: Be able to keep the house for a long time.
Finally, you should think of homeownership as a long-term proposition. Three or four years might be long enough in some locations and markets but in others, five years or more is a better play. Getting stuck with a home you can’t sell when you have to move can be a big blow to your financial well-being.

Of course, following these five rules doesn’t guarantee you financial success nor does breaking them necessarily doom you to life of financial woe. Still, it probably won’t hurt to keep them in mind as you’re looking for a new house.

The USAA Educational Foundation, a nonprofit organization, does not endorse or promote any commercial supplier, product, or service.

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