Buying a house is one of the biggest decisions you'll ever make. Maybe you're looking to fulfill your dream of owning property, or maybe you need more space for your growing family. But either way, there are many things to consider when buying a home, from how much you can afford on a monthly basis to what kinds of maintenance costs will be involved.
The good news is that there are resources out there to help would-be homeowners navigate this process. Consider this information your guide on navigating all aspects of buying a house.
Figure out the basics of your budget
Begin by making a list of all your monthly expenses — everything from groceries to car payments to utilities. Next, figure out how much you can reasonably afford to spend on a mortgage and home maintenance. (For example, if you’re planning to live in New York City or San Francisco and need two bedrooms, that’s going to be more than if you can find a place in Detroit).
Then add up those numbers with insurance costs and utility bills — including internet access if you want it — and see what amount is left over. If the number seems too high for your budget, consider moving somewhere cheaper or settling for less space.
Get pre-approved for a mortgage before you start shopping for a house
You should get pre-approved for a mortgage before you start house shopping. This is because lenders will not give you a mortgage without first seeing proof that you can pay it back. Before applying for a mortgage, ask your lender what documents they need from you and make sure to bring them with you when meeting with the lender.
The lender may also require additional documentation depending on how long it's been since your last loan or credit application, so be prepared to provide any additional documentation requested by the lender as well (such as pay stubs).
Your financial history plays an important role in determining how much of a loan amount they can provide, so if there are any blemishes on your record (such as late payments), talk with someone at the bank about how this might impact their decision regarding whether they approve your loan application.
Know the local market and do your research
You’re going to be spending a lot of time with your new home. It makes sense that you want to make sure it’s the perfect place for you and your family. But before you begin looking for homes, there are some things that are important to understand about the local market — and what may affect your purchasing decisions.
Know the average prices of homes in your area — Get an idea of how much homes have been selling for in recent months by researching online or asking people who live there what they paid when they bought their houses (if they bought recently).
Hire a real estate agent that you trust and feel comfortable with
When it comes to buying a house, you're going to need an agent. They can help you find the right house for your needs, negotiate on your behalf and make sure that all of the paperwork goes through smoothly.
Once you have an offer accepted, they'll also help you locate a mortgage broker who will give recommendations based on your unique financial situation.
Don't be afraid to negotiate on price and demand incentives from sellers
It's also important to negotiate on price and demand incentives from sellers. Although you're probably excited about the house, it's important not to be afraid of asking for something better.
The seller may be willing to lower the price if you ask nicely and show them that you are serious about buying the home. If they know you're ready to make an offer on their property, they'll be more likely to consider your request.
Ask to have the home inspected before you buy it
You might think that your inspector's job is to find problems with the home, but in reality, they're looking for signs of trouble and things that need to be repaired. If you do find something wrong with the house during your inspection, you'll have a chance to negotiate with the seller about how much money they'll pay to fix it.
If you don't use an inspector, then any repairs needed will come out of your own pocket — and if there are several problems with the house that need fixing (and most homes have at least one), it could wind up costing thousands of dollars more than if you'd used an inspector in the first place.
Consider how much home maintenance costs can impact your budget.
How much money do you spend on home maintenance? According to the Consumer Expenditure Survey from the Bureau of Labor Statistics (BLS), homeowners spent an average of $2,100 per year on household repairs (including maintenance.
Find out if there are any easements, covenants, or deed restrictions on the property.
The easements, covenants, and deed restrictions (E&C) are a set of rules that help to define the use of your property. What do they mean? Basically, they’re an agreement between you (the homeowner) and everyone else who has lived on or near your block in the past.
They can impact what you can legally build on your lot, how much landscaping you need to do around it, if there are restrictions on pets or parking spaces — basically anything having to do with how people live their lives around you and how they interact with each other.
You may not be aware of this until it's too late: E&Cs typically don't become an issue until after purchase. Many homebuyers aren't even told about them during escrow. So if possible, try researching these things beforehand.
Find out what the property taxes are like in the area where you'd like to live
Property taxes are a fixed cost that you'll have to pay year-round. But unlike the other expenses we've discussed, property taxes are usually based on your home's value — and if you buy a new house, those taxes will likely be higher than what you're paying now.
You can ask the seller for a copy of their property tax bill when they're showing you around the house. And once your offer is accepted, ask them for another copy so that it's included in your contract.
If this sounds overwhelming or confusing, don't worry. You can find out about property taxes in your area from your local government (search "property tax rates" + [your state]).
Make sure your homeowners insurance rates are affordable
Your homeowners insurance rates are based on several factors, including the area where you live and the type of coverage you want. If you want to reduce your premiums, there are a few things you can do:
Compare prices with different companies. You'll be surprised at how much a difference this can make.
Consider raising your deductible if it's not too high. Just be sure that it won't cost more than it's worth in case of theft or damage.
Install an alarm system if one isn't already installed — this will help reduce costs in case of theft or damage as well as provide peace of mind for families with children (or pets).
Takeaway
Get the facts. The National Association of Realtors has plenty of helpful resources on their website, including a handy FAQ page with everything from how much home ownership costs to the differences between condos and co-ops.
Ask around. If there's someone who seems like they could give good advice about buying real estate in your area, ask them about any issues that come up during the process — or even just how long it took them to find their perfect place.
Conclusion
Hopefully, this article has given you a better sense of how to go about buying a house. While it can be daunting and confusing, the more you know about what's involved, the better prepared you'll be when it comes time to make that first offer on your dream home. Go forth and own.
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