Suze Orman: 4 Questions To Ask (and Answer) Before Buying a Home
Written by
Chris Adam
Edited by
Maria Concepcion
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Many people have been thinking more lately about buying a home, especially with higher interest rates. In fact, the rate on a 30-year mortgage has more than doubled over the past few years. That means it’s more than 7% today.
The increases come amid inflation concerns and higher prices for many things we buy daily. So, does that mean this is a bad time to consider buying a home?
In her blog, Suze Orman lays out several questions to ask and answer before buying a home in the current climate.
How long are you looking to stay put?
The first question to consider is about your future plans. Do you plan to stay where you are for at least five years, preferably 10? Or, are you unsure and think your career or other life opportunities could require a relocation within a few years?
If you plan to stay for a while, it might make sense to buy a house as an investment. Homes are likely to rise in value the longer you own them.
According to Suze Orman, “The longer you can envision you want to stay put, the more confidence you should have in a home as an investment.”
How much do you have in your emergency fund?
Do you have at least eight months of living costs in an emergency fund? You’re going to want this financial security before you take on a mortgage. It also could help you secure a better deal from a lender.
How much do you have for a down payment?
Speaking of mortgages, one of the best ways to qualify for a great rate is to have a 20% down payment. If you don’t have that, look for a 10% down payment at least.
What increases can you afford in your home insurance premium?
You need to be ready to handle big increases in your home insurance premium. That means figuring out what a homeowner’s policy with extended-replacement coverage will cost today and then adding about 20% to that cost. They may not rise by that much in the coming years – but it’s good to know you could afford such an increase. That’s especially true, given what we’ve seen recently.
If you’re ready to explore, you can use Zillow‘s affordability calculator to estimate a comfortable mortgage amount.
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