Oct. 18, 2017, 12:04 p.m.
Top 10 Things You Need to Know Before You Buy a Home
It???s impossible to be too prepared when buying a home???probably the biggest purchase you???ll ever make. If you???re thinking of becoming a new homebuyer, make sure you???ve got the following ten tips in the bag. 10. Decide Whether Buying a Home Is Worth It Although it???s more than just a matter of dollars and cents, right now, in most major cities, buying a home is??35% cheaper than renting. There???s??no right or wrong answer??for everyone, though???home buying comes with a number of benefits (and headaches), but so does renting???so you???ll have to??weigh the pros and cons for yourself. 9. Know How the Home Buying Process Works When you???re sure you???re ready to buy a home, the first thing you???ll need to do is learn everything you can about the process. There???s a lot to know, but??our start-to-finish guide??on the subject will walk you through the basics. Another good resource is the Department of Housing and Urban Development (HUD), which offers videos and articles. Even if you read up as much as you can, there are??some things that you might not know:??don???t think of your home as an investment, don???t buy if you won???t stay put, don???t always trust a buyer???s agent, and don???t get emotionally tied up in the process (be prepared to walk away). 8. Beware of Fixer-Uppers A fixer-upper house lets you buy a home in a neighborhood you might not otherwise be able to afford???if you???re willing to invest in renovations, whether??DIY or leaving to the professionals. These are risky purchases, however, since you don???t want to end up with a money pit. Among??the biggest money pit areas: the basement and foundation. Try getting an inspection after it rains, too. Every home buyer should get a good inspection and be prepared with the responsibilities of working on the house (it doesn???t end!), but when buying a fixer-upper, these are??particularly important.??? 7. Learn More About a Prospective Home You Want to Buy When you???ve found a home you???re interested in, you???ll want to learn as much as possible about it before putting in a deposit. Ask your agent how long the property has been on the market (or check that information at??Zillow)???if it???s been on the market for months with no offers, it could be overpriced or it could be a slow market. You can find out if a home is fairly priced for the neighborhood using??the P/R ratio. Also ask for copies of utility, insurance, and tax bills so you truly understand how much the home will cost (don???t forget homeowner association fees, if applicable).??Look up the sales history of a hometo find out how much it was previously purchased for and how long previous owners stayed in the property. These can offer some clues on the property???s history, but keep in mind that sometimes homes are sold at reduced prices for other reasons than low value. Also, don???t just think of individual properties???neighborhood matters a great deal as well, if not more than the house itself. You can??research neighborhoodsfrom the comfort of your current pad. Be sure to look up school quality ratings, too, as they???re often an indicator of the quality of the neighborhood. 6. Juggle Difficult Buying Situations Buying and selling a home at the same time can be tricky. You have two options: focus on selling first or on buying first. Here are??the pros and cons of each method. If you???re self-employed, qualifying for a mortgage requires more work than if you???re an employee. Make sure you??have your paperwork in order.??? 5. Save Up for That Down Payment Although it???s possible to??buy a home without a down payment, you???ll get a better rate, smaller mortgage payments, and be able to qualify for more loans??if you can put 20% down.??Start saving for the down payment??as soon as you are thinking about buying a home. And don???t forget you???ll have??hefty closing coststo save up for and cover as well.??? 4. Get Your Credit and Finances in Order In addition to saving for the down payment, getting your finances in shape will make it easier to qualify for a mortgage and get the lowest rates.??The basics: keep paying your bills on time (especially your rent),??check??and??monitor??your credit, and don???t make any major purchases or credit mistakes. If the monthly cost of homeownership is going to be greater than what you???re paying now in rent, try living on a new homeowner budget to make sure you can afford it.??? 3. Look Out for Deal Breakers In addition to having your own ???must have and want??? checklist when buying a home, put these??six potential deal-breakers??on your need-to-know list: a roof that needs replacing, a home in a high-risk flood zone, issues with sewer lines and other plumbing, restrictive local zoning rules for home improvements, an electrical system that needs updating. You can??request a CLUE Report on the home??to see every insurance claim made on the home in the last several years, and, in some states, sellers are required by law to disclose any home damage or repairs done. Besides that, while walking through the home, look past attractive finishes like high-end countertops and look for??signs of possible big problems, things like cracks in the foundation or water stains on the ceilings or walls.??? 2. Buy Less House Than You Can Afford Many online calculators tell you how much you can afford, based on your current income and debts. It???s best if you can aim for a house even less than what the calculators tell you so you don???t end up house poor. Financial Samurai suggests??a 30/30 rule???having the 20% down payment and a 10% buffer in savings and your mortgage less than 30 percent of your gross income.??This chartshows the minimum salary you???d need to afford a home in 27 cities. If it doesn???t look like you can afford a home based on these guidelines, look into homebuying programs in your state that provide financial assistance to new homebuyers (in New York, for example, there???s a first-time buyer mortgage program called SONYMA).??? 1. Take Your Time When you???re looking for a new home to buy, it can feel like you???re pressed to make an offer on any home you???re interested in??right now. Relax and take your time shopping around for this major move until you find the home that you???ll love living in for years to come. Shop around for mortgages too, as well as homeowners insurance. When you???ve found the home of your dreams, but it???s already under contract, you can still??make a backup offer on that home.