Owning a home is a dream that most of us desire and when you’re in the fortunate position to buy a house, it’s important to protect that dream by understanding the long-term commitment, the costs, and the value of your investment.
Whether you’re looking to purchase a home earning $12-$16 an hour or you’re saving for your dream home, the following 9 tips can prepare you to successfully buy a house.
1. Negotiate Your Contract
When you purchase a home, you’ll have a lot of paperwork to complete. Many buyers feel overwhelmed and intimidated by the process which prevents them from negotiating their contracts. If there are conditions that you would prefer such as a pre-purchase inspection or the purchase being contingent on your mortgage approval, then you can present these requirements to your realtor and the seller. You should have the opportunity to negotiate your contract within reasonable terms and conditions.
2. Buy for Your Future
When you take on a mortgage, you could be paying it off over the next 20 to 30 years. While one certainly cannot predict the future, it’s always good to consider your lifestyle and goals before you commit to purchasing a house. If you want a family, a house located close to schools and amenities may be a good choice. If you'll be traveling a lot, a secure complex or lock-up & go could be for you. Remember, when you purchase a property, you might only see some equitable gains in 5 years. This means sitting tight until you can sell it at a higher value than the purchase price should you wish to move. Think about your lifestyle for the next 5 years and whether the property you are interested in will satisfy these needs.
3. Think Affordable
When you walk into a house that you fall in love with, but the listing price is well above your means, you’ll be putting yourself under immense stress and financial pressure to keep up with the payments. You won’t even enjoy your new home at the end of the day! We all want to live in a popular neighborhood with a fully renovated interior, a lush garden, a swimming pool, the works; however if you can’t afford it, don’t pursue it.
More than 44 million cost-burdened Americans are currently facing challenges in housing affordability, so consider this scenario: You’re just managing the installments on your home loan, then the company you work for places you on short-time or cuts your pay because of the impact the pandemic has had on business. You earn less but your expenses rise as inflation increases and markets remain unstable. You find yourself in a cost-burdened position, unable to afford your mortgage, which places your home and future at risk.
Start affordable. You can always think about renovating in the future or purchasing a larger house in a different neighborhood when you have the finances.
How much can you afford?
According to analysts, your mortgage, insurance, and associated taxes should be below 30% of your income.
Getting pre-approved for a home loan is also a good way to determine your affordability and it makes the approval process that much faster.
4. Consider Your Marital Status
Buying a house is a long-term commitment unlike renting which offers a month-to-month or year-long lease. It also has many legal implications if you share the house with a spouse or partner. Unmarried couples in states such as Iowa, Colorado, Texas, Kansas, and Oklahoma may be subject to common law. This means that your significant other has rights and benefits that may include the inheritance of property or a share in the estate should the relationship end. Consideration of these laws can help you protect you and your dependents' financial interests.
5. What Does Your Credit Look Like?
Credit is one of the most important financial factors when considering your mortgage approval. Because lenders use your FICO score (which is your credit rating) to determine your financial health, it will influence whether you receive a home loan. Lenders want to know that you can pay your monthly installments on time and if you can’t manage your debts, then you’ll be unable to keep up with your home loan. A positive credit rating also helps you get a better interest rate on your loan.
For more information on credit and working on your financial status, you can check out Credit 101 with tips to rebuild your credit.
6. Shop Around for a House
Take your time to look for your next home. Once you know how much you can afford, search for homes within this cost bracket. While it is easy to look at properties at a much higher price, the temptation to put in an offer is far too great. Stick to your budget and you will find something that satisfies your pocket and your lifestyle.
Factors That You Should Consider When You Shop Around for a House Include:
How long will it take you to get to work? If you don’t have a car, what is public transport like? Is it safe and can you reach major highways with ease?
Get to know the community if you aren’t familiar with the neighborhood. Are there schools nearby, what is the entertainment like, and is it a friendly and secure area? If you don’t know much about a particular suburb, visit the neighborhood on a weekend when most people are home. This way you can get a sense of the general activity.
The House Itself
When you look at a newly renovated house with great floors, kitchen cabinets, and a fresh coat of paint, it’s easy to forget about the practicality of the property. You should consider the layout, the amount of storage available, and the general maintenance. What about the yard? Does it need a lot of work? Will it be expensive to maintain? If it has a pool and you have small children or pets, is it covered or fenced for safety purposes?
Ensure the advert you view online is legitimate before any discussion of a deposit or payments comes into play. Online housing fraud is rife, so ensuring that everything is above board will go a long way to protect your interests and your pocket!
7. Consider a Pre-Purchase Inspection
The initial walkthrough won’t reveal possible roofing issues, plumbing, or the presence of mold and asbestos, especially in older homes. An inspection can minimize any unexpected expenses and it can also be used to negotiate the purchase price or the terms of the transaction. It can also prevent a major cost in repairs should a plumbing or roofing problem materialize when you move in.
8. Organize Your Paperwork
Once you’re ready to make an offer, get all your documents in order so there aren’t any delays in your application. Proof of income, proof of residency, and proof of full-time employment are among the documents that you’ll need to submit when offers are formalized. Keep track of the paperwork so should your offer not be accepted; you’re prepared for the next application.
9. Buy a House if Its Right for You
There are houses in the city and houses in the suburb but only with some preparation, research, and planning will you know which property is right for you.
Buying a house should always start with affordability. If you’ve got to put yourself into a financially stressful position to own property, then waiting until you’ve improved your funds or renting for the foreseeable future is best. There is no rule that says you have to commit to purchasing real estate, so you decide which options are better for your lifestyle and your pocket.
If you do move forward with purchasing property, whether a modest lock up & go or a spacious single-family home, take the time to find affordability and don't feel pressured into making a decision.
When you feel confident and at ease, and the day comes for your Realtor to hand you the keys, you'll know that you have a place not on loan, but your very own forever home...