How to Buy a House & the Process of Buying a House
Whether you are buying your first home or your fifth, the process of buying a home can be an emotional, time-consuming venture. In the end, feeling you picked the right home for you and your family and within your budget makes all the difference.
As with most major decisions, the amount of work and research you undertake before you start shopping can have a dramatic effect on how well you do in the end.
Visit your lending institution prior to shopping. Being pre-approved gives you a solid price range, and lets your Realtor and potential sellers know that you are serious and not just a browser.
Get the Right People Behind You
Buying a home is a complicated process, with many people involved. Having the right people on your side can make a big difference. An experienced, dedicated, and knowledgeable Realtor can put a team of advocates, including lenders, lawyers, home inspectors and movers, on your side immediately.
Location, Location, Location
It’s still true. The desirability and resale value of your home depend on location more than any other factor. People want a desirable community that includes character, quality of schools, access to work, major transportation arteries, recreational facilities, etc.
On your viewing trips, take a careful look and ask the following questions: How does this home compare to others in the neighborhood? Are yards fenced? Are there many children playing in the streets? Are the front and back yards and the exteriors of the homes properly maintained? The less expensive houses in a better area tend to appreciate faster than the most expensive houses in a less desirable area.
Additional factors that affect the property value of a home include traffic, sounds, smells, zoning bylaws, and many others. Be objective. Be sure you are completely satisfied with the neighborhood. If you choose a neighborhood with problems, you likely won’t get as much as you hoped when it comes time to sell.
The more you share with your Realtor, the better he or she will be able to represent you. Letting your representative know exactly what you’re looking for, in terms of needs/wants, price range, and location, can eliminate unnecessary trips to unsuitable homes and that focus can help ensure that you wind up in the right home.
Use Your Realtor’s Knowledge
Your Realtor is trained in all aspects of real estate, including understanding supply and demand, economics, and the neighborhoods of the city in which they practice. A professional Realtor can do much of the work for you, by reviewing your needs, reviewing available properties, and making an informed match. A comprehensive knowledge of the available homes in your neighborhood is one of your Realtor’s ® strongest assets. With the aid of computerized systems, a Realtor is notified within hours when a home becomes available.
Shopping for a new home is an emotional experience. It is, however, also a business transaction, and must be treated as such.
Three of the most devastating things that can go wrong are:
- Paying too much
- Losing a dream home to another buyer
- Buying the wrong home
When you have a systematic plan before you shop, you’ll be sure to avoid these costly errors. The following tips will assist you in making an informed decision when purchasing your new home.
Get the Information You Need
What price do you offer a seller? Is the seller’s asking price too high? Is it a deal? Your own research is important, as is the
assistance of a Realtor®. A professional Realtor® can offer an unbiased opinion on the value of a home, based on many factors
and a great deal of information. Without knowledge of the market, your offer could be too much. Or worse, you could miss out on a great buying opportunity. Hire the right person and trust that person to represent your interests.
Buy YOUR Home
What do you need and want in a home? Sounds simple, but clearly identifying your needs and bringing an objective view to
home shopping leaves you in a much better position. How much space do you really need? Too small and you may feel like you
live in constant clutter. Too big and maintenance may become too daunting. Outline all of your priorities, and work on finding not just a great home, but a great home for you.
Minimize the Unexpected
For $300 – $500, a professional inspector will conduct a thorough inspection of the home. Their expertise can mean the difference between uncovering major flaws before or after you own a home. Make the final contract subject to the report’s findings.
It only takes a few days to get financing pre-approval. When you are shopping for a home, this gives you more power. A seller is
more likely to consider an offer from a serious buyer.
Remember Additional Costs
Besides the funds for the purchase of a home, you’ll need funds for items such as loan fees, insurance, legal fees, surveys,
Take a Deep Breath
Before you sign, ensure that all documentation clearly reflects your understanding and conditions of the transaction. Has
anything been forgotten? Don’t rush. You could lose money, financing, or even the sale if you attempt to push things through
There are several important considerations to buyers.
With interest rates low, many renters are starting to think about purchasing a home of their own. While simple rental cost vs. mortgage cost comparisons can be very attractive, buying a home is a serious commitment, and there are many factors to consider…
Your Financial Health – Your Credit and Home Affordability.
Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? Is your credit good? While you can always find a lender to lend you money, people with poor credit tend to pay far more to borrow.
Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries. The other school of thought says you should stretch to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow. It is, however, important to stay within your comfort zone. Purchasing a house involves many up-front and ongoing costs, and the stress of worrying about those costs often outweighs the satisfaction that may come from owning a slightly nicer home.
To determine how much home you can afford, talk to a lender or go online and use a home affordability calculator. Good calculators will give you a range of what you may qualify for. Then call a lender. While some may say that the “28/36” rule applies, in today’s home mortgage market, lenders are making loans customized to a particular person’s situation.
The “28/36” rule means that your monthly housing costs can’t exceed 28 percent of your income and your total debt load can’t exceed 36 percent of your total monthly income. Depending on your assets, credit history, job potential, and other factors, lenders can push the ratios up to 40-60% or higher. While we’re not advocating you purchase a home utilizing
the higher ratios, it’s important for you to know your options.
Home meets your needs?
What features do you require in a home to satisfy your lifestyle now? Five years from now? People tend to remain in homes longer than they initially intend, primarily due to the work and expense associated with moving. Therefore it is worth considering a home with room to grow.
Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite?
Having an idea of what you’ll need will help you find a home that will satisfy you for years to come.
Cost of home Ownership
Maintenance, improvements, taxes, and insurance are all costs that are added to a monthly house payment. If you buy a condominium or townhouse, a monthly homeowner’s association or maintenance fee will be required. If these additional costs are a concern, you can make choices to lower or avoid these fees. Be sure to make your Realtor® and your lender aware of your desire to limit these costs.
If you are still unsure if you should buy a home after making these considerations, you may want to consult with an accountant or financial planner to help you assess how a home purchase fits into your overall financial goals.
Home Down-payment & Closing
Typically, home buyers will need some money for a down payment and closing costs. However, with today’s broad range of loan options, having a lot of money saved for a down payment is not always necessary – if you can prove that you are a good financial risk for a lender. If your credit isn’t stellar but you have managed to save 10-20% for a down payment, you will still appear to be a very good financial risk to a lender. High-ratio mortgages can be a good option for those who haven’t managed to save a large chunk of money (who has?), but naturally, these have additional costs associated with them.
Selling a home costs money. If you potentially may have to move in the short term, the value of your home may not have appreciated enough to cover the costs of buying and selling.
The length of time that it will take to cover those costs depends on various economic factors. Average appreciation tends to sit at around 5% per year. In this case, you should plan to stay in your home at least 3-4 years to cover buying and selling costs. The real estate market can be particularly volatile, however, and dramatic swings up and down are not uncommon.