Elements of Home Buying
Price. Location. Size
The home buying journey can be stressful, and it doesn’t have to be. Your journey started when you finally saved enough money for a down payment, realized you need more space, or that you want to live in a different location. You envision everything you want in your new home. An updated kitchen with stainless steel appliances and granite countertops. Large walk-in closets in each bedroom. And plenty of outdoor space to entertain guests. All things you’re starting to realize you can’t live without.
Equipped with your wish list, you turn to your favorite home search app. And from the comfort of your current living room, you view, love, and count the days it took for your favorite homes to go under contract. You still haven’t left your couch to tour any homes, because up until now searching for a home online beats doom scrolling on social media. But after a few months, you put your phone down and decide to visit some open houses. And just like that, the home buying process got real.
Of course, the real estate agent at the first open house you attend promises you the world. And because they sense blood in the water in the form of an unrepresented buyer, they do everything to make you sign a buyer’s agreement. Before you know it, you’re receiving weekly emails from your new agent and the pressure is on. It seems like it got too real too fast. And it did.
Before getting too far into the home buying process, it’s important to prepare yourself for what’s to come by creating a game plan you’re comfortable with. Developing a game plan will put you in the best position to have a pleasant home-buying journey. The home buying journey is not a one size fits all approach. And because of that, your game plan should be unique to you and your needs
Whether you realize it or not, you have just set your intention to purchase a home. And if you didn’t realize it, rest assured your real estate agent will remind you. The next step, and the most important one at this point, is to set a budget for your new home purchase. If you will obtain a mortgage for your new home, then it’s in your best interest to speak with a competent lender early in your home buying journey. The lender of your choice will look at your current financial background and provide you with a pre-approval letter depending on your income, debt level, and credit score. The pre-approval letter you receive will set the top end of your budget. If you plan on paying cash for your new home, then you will need to provide proof of funds in the form of account statements. Regardless of how you will pay for your new home, most buyers will have a budget they have to work with.
Your home buying journey is now in full swing. You set the intention of buying a home, you have a competent real estate agent, and you have a budget. At this point, most buyers will feel a little overwhelmed with the possibilities. That’s why it’s important to understand the three elements of home buying. It’s also important to decide early in your journey which two of the three elements are the most important to you. Let’s take a look at the three elements and see which two you will choose as the most important.
Price
Location
Size
Price
If you will obtain a mortgage for your new home, then it’s important to start your journey by speaking with a competent lender who will give you a pre-approval letter. The pre-approval letter will be your starting point to determine how much home you can afford. If you will be paying cash, then it’s up to you to set the budget you’re comfortable with. Whether you are obtaining a mortgage or paying cash for your new home, you will need to provide your real estate agent with proof of funds before making an offer on a home.
When I purchased my home, the price of the home was the first element I picked. I had a certain budget that I was not willing to exceed. For your reference, the amount I did not want to exceed was much less than what the lender’s pre-approval letter said I can afford. The reason I decided to purchase a home for less than what the lender would approve is that the pre-approval letter does not consider my spending or savings habits. I did not want to stretch my budget for a home and end up house poor.
For most buyers, price is a major factor when purchasing a home. Whether you are paying for your home in cash or with a loan, your home search will be within a specific price range. I always recommend home buyers stay within their original budget throughout their home buying journey. You will be tempted to stretch your budget as you see homes that are at the top of your price range. This is especially true in a competitive seller’s market.
If you will need a mortgage for your home, then the pre-approval letter will set the top range of your budget. It’s important to understand that many pre-approval letters do not consider your lifestyle needs. For instance, if you love to travel, eat out, or save more than the average person, then you will need to adjust your purchasing power to reflect those expenses. The last thing you want is for the home of your dreams to turn into a nightmare for your finances.
Location
Finding a home in a location you desire is a critical part of the home buying process. Your home is more than the walls that surround you, your home is also the neighborhood you live in and the quality of life it provides. For 73% of home buyers, location is the most important aspect of the home buying process.
Every buyer is different when it comes to their ideal location. For instance, when I purchased my home I needed to live in a neighborhood that is close to bike trails and outdoor space. Although being close to a bike trail is not important to every buyer, it was important to me. And for that reason, I selected location as my second most important element in the home buying journey.
If location is important to you, then I suggest making sure you stick with it throughout your journey. It will be tempting at times to live in a location you are not excited about because you can purchase a bigger home that’s within your budget. However, in my experience, I have found that using that strategy never ends well. Living in a location you enjoy will have a positive impact on your quality of life.
Size
The size of your home should take into consideration your current and future needs. You may need a home office if you will be working from home or need extra space if you enjoy entertaining guests. You may want a larger yard with plenty of space between you and your neighbors. If the size of your home is important, then you may need to look outside of your desired location if your budget is not flexible.
The size of the home I purchased was not a top priority for me. Instead, I opted to purchase a home within my budget and in my favorite location. It’s a decision I do not regret. My circumstances when I purchased my home allowed me to be flexible as it relates to the size of the home I purchased. Your circumstances when purchasing your home may be different from mine.
The size of the home you desire is unique to your current and future needs. Some buyers prefer a home that’s a perfect size for their current needs, while others prefer a larger home they may be able to grow into. Whatever the reason is to choose size as an element of your home buying journey, make sure you buy a home that will fit your needs for the next five to ten years.
Conclusion
Most buyers have a specific budget they can’t exceed. A buyer with a budget they can’t exceed must choose price as the first element in their home buying journey. That leaves two other elements for them to choose between, size and location. There is not a right answer to which element is more important, it's a personal decision that is different for each buyer.
The first step to buying the home of your dreams is choosing the elements of the home buying journey that are most important to you. With proper planning and a well-laid out game plan, your home buying journey will be stress-free and enjoyable.