Buying a home can be a stressful process at any stage in life. With many variables such as your financial status, the current housing market, and your overall life situation or goals, it helps to have a guide before making a decision.
To help you make that decision, here are 9 things to know before you buy a home:
What’s Your Credit Score?
Many people have no idea what their credit score is. Unless you plan to pay cash for your home, you need to obtain a credit report so you can figure out what kind of mortgage you can get.
Low credit scores add to mortgage costs. If you encounter problems on your credit report, you need to fix them before qualifying for a loan.
Can You Really Afford It?
The general rule for calculating what home you can afford is to multiply your annual income by 4 to get an idea of the price range you should be considering.
Or you can use our mortgage calculator to find out what your monthly payments would be.
Plan For The Future
It is recommended that you only purchase a home if you can commit to staying there for at least 3-5 years. Choose a home within your financial means and in an area close to work or school.
If you end up selling sooner than the recommended time frame, you can expect to incur transactional costs associated with the sale. Even if the market is getting stronger, you may still end up losing money.
You Don’t Need a 20% Down Payment
Although getting a loan is more difficult nowadays, there are public and private lenders willing to work with potential homebuyers. Given the right credit and qualifications, lenders may offer low interest mortgage rates that require less than 20% down.
However, if you haven’t saved the 20% down payment, are you really ready to buy a home? This is an important question to ask yourself.
Points and Rate on a Mortgage
When choosing a mortgage, you’re typically given the option to pay additional “points.” This means you’re essentially buying a lower interest rate; a big factor in your monthly mortgage payment.
As ideal as this sounds, be careful. When you buy down an interest rate, that money is gone for good. If you plan to live in that home for a while, it makes more sense to buy the rate down so you can get a return on investment.
Location, Location, Location
If you don’t like to swim or don’t have any kids, does that mean a house near a pool isn’t an option? If you find a great deal on it, it may be.
When the time comes to sell, a home that is desirable to others make it a worthwhile investment. The overall goal is ensuring good resale value. Choosing a home in a good school district and away from main roads or intersections helps achieve this goal.
Get Pre-Approved First
Many buyers go searching for homes before being pre-approved. This is not the same thing as “pre-qualification” which is an estimate based on what you say your finances are.
Pre-approval is based on actual income, credit, and debt history as obtained and verified by a lender. This will let you and your buyer agent know what you can actually afford.
Finding a Professional Buyer Agent
Working with a buyer agent who genuinely has your best interest at heart is invaluable. They will guide you through the process, help with negotiations, and assist with the closing process.
Best of all, and sometimes unknown to potential buyers, is that the buyer agent’s commission is paid by the seller.
Get a Home Inspection
Once you have a house on your radar, a home inspection is essential. A qualified home inspector will identify any potential problems you may encounter down the road.
Problems found with the home will allow buyers to request repairs by the seller and negotiate the home’s price. Having a buyer agent recommend home inspectors they’ve worked with is recommended.