What to Know when Buying a Home
Buying a home can be a tricky process, so it's important to have as much guidance as possible. I'm hoping these simple tips help you become knowledgable and comfortable with the process.
1. Don't buy if you aren't planning to stay a while.
Owning a home may not be practical if you don't plan on staying in an area for at least a few years. If you try and sell your home any sooner, considering the buying and selling transactions costs, you may lose money.
2. Make sure your credit is in good order.
The majority of buyers need to obtain mortgages to buy property. At least a few months before beginning your home search contact the various credit bureaus for copies of your credit reports. Make sure they are correct and that any errors or problems noted are taken care of. It is important that your credit history be in the best shape possible.
3. Buy what you can afford.
Use an online calculator to figure out how your income, expenses and debts may determine what price home you can afford. The blanket rule for home purchase is to have the purchase price not exceed two and a half times your annual income. This figure is just a basic guide and can be adjusted up or down depending on your cash flow.
4. It is possible to buy a home without the customary down payment?
If you think the lack of a down payment means you can't own a home, think again. There are private and public lenders that offer low interest mortgages with reduced down payments as low as 5 percent of the home's purchase price.
5. Purchase in a neighbourhood that has good schools.
This is sound advice for buying in most areas even if there are no children in your home to consider. Having a good school in your neighbourhood increases your property value and makes it easier to sell when the time comes because it is of interest to a greater number of potential buyers.
6. Seek the help of a professional.
The internet is a great tool for starting your home search. It gives you access to home listings and information on the various neighbourhoods that is wonderful to have. Once you have learned all you can online and are ready to "hit the pavement" enlist the services of a real estate professional that specializes in home purchases. They can use their knowledge and experience to help you get the best deal on your investment.
7. Consider carefully when choosing between fixed and open mortgage interest rates.
When considering whether to take a fixed or open interest rate mortgage, factor your personality into the equation. Are you comfortable with the uncertainty of varied future mortgage payment amounts or do you prefer locking into a secure monthly figure that you can budget for the long term? Do the math, but consider your comfort level as well.
8. Get pre-approved before you start your search.
There is nothing more disappointing than finding a house you love and then finding you can't afford it. Getting pre approval from a lender puts you in a position to know what you can and cannot spend and your agent can steer you to those homes within your budget. Pre-approval is different from pre-qualifying. It is just a basic look at your income, credit history and debt load.
9. Study the market before bidding.
Find out the sales prices of similar homes in the area for the last three months before placing your opening bid. Figure out your bid by using those prices as a base for your bid. As an example, if the average selling price is 5% less than the asking price, your opening bid should be between 8% and 10% lower than the seller's asking price.
10. Have the home inspected.
Lenders will require a home appraisal to make sure the home is worth the agreed price. You should have an independent evaluation done to find out if there are any potential problems with the home. This will put you in a position to request the present owner to take care of the issues or decide if you wish to take care of the problems. It can also help determine if you will need to borrow additional funds for renovations as well as if renegotiating the selling price is an option. Hire a local home inspector, preferably an engineer that is familiar with home evaluations in the area you are buying in.