Deciding to buy new or existing property can be an overwhelming decision. There are many questions to answer, such as: what are the pros and cons of buying new? How can I get the best deal? And what should I look for when visiting show homes? For answers to these questions and more, read on.
The process of buying a home can be both demanding and gratifying, but it is also very time-consuming. When searching for houses to buy, it is critical to creating a checklist that will help you better prepare for the journey ahead.
1. How Much Are You Willing To Spend?
How much can you afford? When purchasing a home, it’s essential to consider your income and spending habits. The location and type of home you are buying will also impact your budget.
Make sure you’ve set aside some money in case of an emergency. Before you spend all your money on anything, ensure you’ve got something to fall back on.
According to Investopedia, these should be able to last you up to six months. It’s also essential to ensure that your savings are accessible as liquid cash or current asset that you liquidate fast. They should also be able to provide a return to keep up with costs associated with inflation.
Mortgage calculators, most of which are available online, can assist you define what you can afford. Review your spending and check your credit score to know how much you will spend on mortgage payments.
Other than the mortgage, consider other expenses that accompany owning a home, including repair costs, homeowner association fees, landscaping costs, down payment, closing costs, and taxes.
2. Do Not Skip Pre-Approval
Though it’s exciting to skip everything and start house hunting, getting a mortgage pre-approval is paramount. Unlike a prequalification approval which is primarily an informal evaluation of your income, mortgage pre-approval is essential in that it tells you exactly how much money you can access from your lender. The information is readily available from your bank statements, W-2s, and credit score.
According to Rocket Mortgage, pre-approval for mortgages helps you in the following ways:
- You get to know precisely what you can afford
- Pre-approval shows evidence to the seller that you can afford their house. This boosts your position when buying
- It reduces last-minute surprises with your lender since you already know how much you can spend on buying a house
3. Save for a Down Payment
The United States Federal Housing Administration gives first-time homeowners access to tax breaks, an FHA loan, and state programs. This mostly applies to first-time homeowners.
To qualify for some of these benefits, you have to be;
- Anyone with no residence within the three years preceding the time of buying a house. This time ends on the date of a property purchase
- A single parent whose only homeownership was with a former spouse
- A displaced individual from home previously co-owned with a spouse
- An individual whose property wasn’t in compliance with state codes and guidelines. Upon evaluation, bringing up a permanent structure is cheaper than making your existing house compliant.
Assistance programs give first-time homeowners the ability to access down payment assistance through grants and loans. According to Bankrate, having at least a 20% down payment helps you avoid conventional lending and mortgage insurance.
4. Think Long Term
Is buying a new home the best decision? Is renting more reasonable? Is this your forever home, or is it just a starter? Asking these questions helps you know what mortgage is best for you. It also helps in deciding the kind of property you will buy.
One of the critical things is to research the neighborhood you want to live in. Here, look at;
- The crime rate in the area
- Noise levels at different times of the day and night
- How well maintained the neighborhood is (this has an impact on the cost and value of the house)
- Check the distance from your home to schools, grocery stores, banks, etc., since these determine how much time you will be on the road running errands and commuting.
- Check recent sale prices of the neighboring homes similar to the one you’re interested in
5. Find a Real Estate Agent That Suits You
Get professional help when buying a home. A real estate agent;
- Answers your questions about homeownership
- Points out things to look for before acquiring property and
- He also helps you in negotiations with property owners
Since they know more about market rates and the value of a property, real estate agents can help you get value for money when making a purchase. They are also aware of properties not yet advertised on the market. Ideally, this gives you have a competitive edge by getting an early peek at properties that aren’t yet on the market.
If you would like more home buying tips, check out our new home buying checklist.