Purchasing a Home
Purchasing a home is unequivocally one of the hardest decisions someone will make. A home loan is a long term commitment and it is the best interest of the person to make sure this is the home they want. Location, size, style and price are all factors that should affect your decision whether to purchase a certain home or not. However, what factors will determine when the right time is to purchase a home and what indicators are there to tell you that financially this a sound decision? These are a lot of factors that must be researched before purchasing a home to ensure that the correct decision is made. This paper will discuss the factors that should be taken into consideration when purchasing a home to help avoid financial devastation.
When deciding to purchase a home one principle of economics to consider is “the cost of something is what you give up to get it” (Mankiw, 2007). This is particularly true when purchasing a home. It all depends on how much money you are willing to give up in order to purchase the home that you desire. There are cost and labor associated with owning a home so you must first weigh what you will be giving up with what you will be getting. Is the trade equal? Are you giving up more than you are getting? These questions will help you to see if you are giving up too much in exchange for a much smaller return. For instance, you desire a home in Hollywood, CA. The cost of the home is 1.3 million dollars. You are in a gated community so you must pay HOA fees and the home is much smaller then you originally desired. You must ask yourself if you are giving up too much money in exchange for a home that is close to what you desire but not exactly what you envisioned. However, we all know that people respond to incentives (Mankiw, 2007). Meaning, you have to look at what you are gaining when purchasing a home. Incentives don’t have to be large to attract buyers. Incentives such a washer and dryer included with new developments tend to attract
When deciding to purchase a home one principle of economics to consider is “the cost of something is what you give up to get it” (Mankiw, 2007). This is particularly true when purchasing a home. It all depends on how much money you are willing to give up in order to purchase the home that you desire. There are cost and labor associated with owning a home so you must first weigh what you will be giving up with what you will be getting. Is the trade equal? Are you giving up more than you are getting? These questions will help you to see if you are giving up too much in exchange for a much smaller return. For instance, you desire a home in Hollywood, CA. The cost of the home is 1.3 million dollars. You are in a gated community so you must pay HOA fees and the home is much smaller then you originally desired. You must ask yourself if you are giving up too much money in exchange for a home that is close to what you desire but not exactly what you envisioned. However, we all know that people respond to incentives (Mankiw, 2007). Meaning, you have to look at what you are gaining when purchasing a home. Incentives don’t have to be large to attract buyers. Incentives such a washer and dryer included with new developments tend to attract
References: Amadeo, K. (2012, September 4). How the 9/11 Attacks Still Affect the Economy Today. Retrieved March 7, 2013, from http://useconomy.about.com/od/Financial-Crisis/f/911-Attacks-Economic-Impact.htm Mankiw, N. G. (2007). Principles of economics (4th ed.). Mason, OH: South-Western Cengage Learning. Siegfried, J., Krueger, A., Collins, S., Frank, R., MacDonald, R., McGoldrick, K., & Taylor, J. (2010). Voluntary National Content Standards in Economics (2nd ed., p. 6). New York, NY: US Dept. of Education. Retrieved March 7, 2013, from http://www.councilforeconed.org/wp/wp-content/uploads/2012/03/voluntary-national-content-standards-2010.pdf