A New Home Decision
A New Home Decision
It is really nice to have an investment of your own, especially when the money comes from your own pocket (2012, First Time Home Buyers). Like for example, one of the best investments that a person could have in their life is to have his or her own home, a home that he or she could call their own. When it comes to purchasing a car, new home or even clothing you must weigh the benefits and cost properly so that you do not lead yourself down a path of financial ruins. While the idea of purchasing a new home is very exciting, it can also sometimes be overwhelming. A significant amount of time for consideration and evaluations is necessary when making a major purchase such as buying a new home. Purchasing a home can have severe financial repercussions, thus making the decision to purchase a new home a daunting and challenging choice, so when making a large financial decision, the basic principles of economics along with one’s relative needs you must closely assess. Many of the decisions we make as consumers directly relate to the current state of the economy.
While the search for a new home continues, a couple of key principles should be used and will prove to be rather helpful to the new homebuyer. Comparing marginal costs with marginal benefits while weighing out the disadvantages and advantages of the purchase is included in this process (NAHB, 2011). As homeowners have testified, a couple of key principles will contribute to this life-changing decision. “Trade-offs” is one of the principles you will face before and after your purchase. That means that there is a cost for everything. When a major purchase decision is made consumers definitely have to give up another thing that they equally like such as a new car, vacation, other major purchases, or savings and investment. Trade-offs exist for almost every decision contemplated, but in the real estate market, trade-offs can be serious when money is the concern. Neither buyer nor seller wants to lose money in one of the biggest transactions they will ever complete. You can make better decisions when you realize that life has tradeoffs. The cost of what one decides to buy is equivalent to the cost of what one gives up for it. Choosing entails trading off a target against another and is a fundamental issue of the decision-making process. In order to purchase a beautiful home, one will have to sacrifice “opportunity cost”; for instance, I have to cut-down on individual costs like entertainment, clothing and food. When you have to choose one thing over another then you have to make do without the benefits of that which you do not have. You have to compare the cost and benefits of what you have to make the best choice. For example, choosing college over working a full-time job for four years is that after you graduate more opportunities begin for a better paying job. However, in this market the opportunity cost is typically minimal because the buyer can simply find another home that meets his or her needs. Cost is not a matter of dollars and cents; it also represents what we must give up to get something else. In reality, we do not always make decisions that are all or nothing. Some choices are made based on “marginal changes”. When we think of purchasing a home one must compare the marginal cost of purchasing a home. Amortization is a marginal cost, will the payments be an addition to what you are already paying if you are renting. The difference in the amount is marginal cost. You must also consider the mortgage insurance cost, as a result, of purchasing a home. Will the house be bigger, adding more room for your growing family? Will utilities be higher? Other marginal cost to be considered would be; the cost of moving, your travel time, the expense of gas and mileage on your car, which is associated with your travel time, if your new home is...
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