OWN Your Home-DON’T Let it Own You

Written By Bonnie

90% of the world’s millionaires were created by investing in real estate.

Buying your primary residence can be a great start.

If you’re in the market for a home

HERE ARE QUESTIONS TO CONSIDER

#1. Buying vs Renting?

(Timing plays a huge factor. How long do you plan to stay at this residence?)

  • More than 5 years

    • Buying may be a better option as you might be able to recoup the closing and moving costs and weather any volatility the real estate market may face.

  • Less than 3 years

    • Then renting might be the better option.

  • In between (~ 4-5 years)

    • Buying may be okay but do your research so you don’t get stuck in a house you owe more on than what it is worth, say if the economy were to go down for some reason.


#2. Are You Ready to Buy?

  • Are you out of debt?

  • Do you have an emergency fund of at least 3-6 months?

    • Check out the Make a Plan and/or Savings pages for tips to know what is a sufficient emergency fund amount for you.

  • Do you have a good strong down payment?

    • (20% is preferable to avoid PMI but could be less if a first-time home buyer, however, you’ll have to pay PMI. You might be able to refinance later to get rid of PMI, but that may not be smart in an economy with rising interest rates. Do your homework on what will be best for you.)


#3. What is the Purpose of the Home/Real Estate?

  • If you're buying for money reasons

    • Put more time into researching to get the best deal.

  • If you’re buying memories

    • Do not try to time the market and buy what fits your needs and budget best.


OTHER TIPS

  • Location is most important as this is something you cannot (or is much harder to) change.

  • Plan/budget for about 1% of the home’s value per year for upkeep and repairs.

  • DO NOT forgo inspections. No matter what! You don’t want your dream home to become your nightmare. At a bare minimum, ask for a pass/fail inspection.

  • Ask yourself what is the smallest amount you can pay for a house that will meet your needs so you can focus on investing toward your financial freedom. (This is a F.I.R.E. Community tip.)

  • Stick with fixed-rate mortgages, but IF you choose an adjustable-rate mortgage (ARM), then plan to pay off your entire mortgage within the teaser timeframe (When the interest rate is fixed/non-adjusting. Usually within the first 5 years.)

  • Aim to keep mortgage payments under 25% of your gross income. This should include principal, interest, taxes, insurance, and any HOA fees. Some also suggest including utilities in this as well as that will help afford you the ability to invest more.

    Bonus Tip: Remember to review your home insurance policy every few years and update it if needed. Home values fluctuate, and sometimes they can fluctuate rapidly. (This is very important in high inflationary times.)


HOUSE HACKING

This is a popular tool used by the F.I.R.E. Community.

House Hacking is when you buy a residence (a duplex, other multi-living unit, or even a house), and you live in part and rent out part.

This income can help you pay the mortgage, allowing you to save and invest more or pay down the mortgage faster.

This can be a great way to gain financial freedom more quickly.

Note: Do your research as not all places allow multi-family living.


For more House/Real Estate tips, check out the House and Real Estate page

Let us know if you have anything to add. We are all learning together!

Bonnie

I feel we are all students of one another, learning from each other’s strengths and weaknesses. I am not a financial advisor, but I am continuously learning on my journey to become financially independent, and I’m passionate about teaching others how to do the same. Come learn with me so we can live our best lives and then spread our wings to help others do the same

“Reach one, teach one, and repeat. If the world did this, we would be a much better place.” - Rudy Martinez (Alaska Prepper)

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