Buying a home is a huge investment for your future and perhaps, one of the biggest decisions that you would make in your life. To ensure that your dream home does not give you nightmares, here are a few things that every home buyer should know before finalizing a deal.
1. What are your needs?
Have a clear idea of what you are looking for. Do you need a home in the suburbs with lots of open space where kids could run around? Or would you prefer living in the heart of the city where you have easy access to malls and restaurants? If you have children, you’ll have to take into consideration the distance they have to travel daily to reach school. And don’t forget to ask yourself whether you are okay with spending three hours on the road every day traveling to and from work.
Whatever your needs are, every home buyer should know that finding a perfect house which meets all your requirements and falls within your budget is going to take time and effort. But the results are going to be well worth the effort.
Do not comprise on things that matter or get coaxed by an agent into buying a house that is not suitable for you. For many, buying a house is a lifetime investment. A well-appointed house in an unsafe neighborhood is always a bad idea, even if you are getting a very good deal. Never rush into a deal only to regret it later.
2. Do you have a pre-approved loan?
Pre-approvals help to determine your maximum purchase price. Be ready to provide detailed financial documents to a lender who can tell you how much house you qualify for. You can narrow down your search based on this estimate and save time which would have been otherwise wasted looking at houses outside your price range.
A pre-approved loan lets the seller know that you are serious about buying a house, especially if he is considering multiple bids. It can also speed up the process once you’ve found your perfect house. Again, some banks are ready only to pre-qualify a buyer and do not offer pre-approvals.
At this stage, also calculate how much money you can put down as a down payment on the property.
3. Are you in a position to meet the miscellaneous expenses?
Owning a house comes with a lot of miscellaneous expenses, such as property taxes, maintenance, utilities, insurance, home owners’ association fees and so on, in addition to your mortgage payments.
Don’t jump into buying a new home just because your friends are doing so or the real estate market is booming or your cards tell you to. Only you can decide whether it is the right time for you to buy a house.
Does your budget allow for a new property at this point in your life? If it means that you have to make tough choices such as moving your kids to a slightly cheaper and less reputed school or your spouse has to slog at office every day without time for personal life, stop and rethink. It may be better to wait for a few more years when you’ll have enough funds set aside to ensure that your lifestyle does not take a beating as a result of moving into your own home.
4. Should you have a professional inspection done?
It is always a wise decision to have the house inspected by a professional before you reach the closing stage. Some lenders require a professional inspection to ensure that the purchase price is in accordance with the market value of the property.
Though hiring a professional will cost you a few hundred dollars, it is going to save you a lot of money and heartache in the long run. Though it may be tempting to do the inspection yourself, do not attempt it. A professional will be able to tell you if the house has any structural damages or issues that are not evident to your untrained eye. Though he will give you a written report after the inspection, it would be better if you are able to accompany him during the inspection. He will be able to guide you in person on what repairs or renovations have to be done once you buy the house.
If the professional evaluation unveils any flaws, it can also help you in further price negotiations before you close the deal.
5. What is your back-out plan?
If the inspection has thrown up huge problems in the property that is going to cost you thousands of dollars to repair or the appraisal value is far less than the purchase price you agreed to, you may want to reconsider your decision and hence the importance of a solid back-out plan.
Make sure that your purchase agreement includes a contingency plan that allows you to back out of the deal and void the contract if the home inspection throws up any major problems.
6. What comprises a competitive offer?
Though you may be dependent on your real estate agent to get you a competitive deal that is fair to both parties, it is always better to conduct a market analysis which can help you understand the value of the property and tell you what buyers are ready to pay for similar homes in the same area. This can help you come up with a unique bid strategy that will keep you ahead of the competition.
If you are frequently losing out on bids or being rejected, it may be time to reevaluate your approach. In real-estate, low-balling does not always get you the best deal and in today’s competitive housing market, low-balling probably won’t get you the house you want
7. Will you have enough money to spend on refurbishing and decorating later?
If you invest all your loose cash in down payment and closing costs on your new home, you may find yourself short of money to do the necessary upgrades and decorations before you move in. Save enough money beforehand so that you can adapt your new home to suit you and your family, buy new furniture, convert the third bedroom into a home office and so on.
As you can see, there are many things to consider when embarking on your journey to buy a home. If you are a first time home buyer, the best advice is to work with a reputable Realtor and do your homework. Many home buyers have rushed in to buying a home only to find themselves living in a beautiful home with no money left over each month to leave it and enjoy life. But home buyers that pay attention to the details, especially the financials of owning a home, end up be very happy home owners. Here’s hoping that will be you!
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