Today’s post is a guest submission from Jay Robert of Zillow
Buying a house is a little like picking a spouse: It’s important to do it right because it’s going to be a long relationship. Unfortunately, many people rush into the home buying process unarmed with the information they need and end up unsatisfied with their homes. Here’s how to ensure a relationship with a new home is a perfect match.
1. Understand the true cost of homeownership
The true cost of a home is far more than just the monthly mortgage payments. Home buyers also have to factor in maintenance costs (experts say to budget between 1 and 2 percent of the purchase price of the home each year for maintenance), taxes, HOA fees and insurance such as homeowners insurance, private mortgage insurance and other supplemental policies. Buyers must do the math on the home they want and then look at their budgets and ask themselves: If I buy this home, how will it impact my finances? Experts typically recommend homeownership costs not exceed 30 percent of a homeowners’ monthly take-home pay. So, if it’s too pricey of a property, it may pay to skip.
Many potential homeowners will find that they need to pay off debt before getting too far into the home purchase process. If that’s the case for you, check out this helpful credit card debt payoff calculator. Getting your debt situation in order is a crucial first step to take before you even start poking around the internet looking for potential homes to fall in love with.
2. Visit the home multiple times
Though buyers may get a great feeling about a home and want to put in an offer on the spot, it’s wise to visit the home at least twice and at different times of day. Buyers may discover something strange about the home at night that they didn’t notice during the day or vice versa. Study the listing photos for another perspective. Also, it helps to look at the home privately (rather than with the real estate agent or a crowd of people) as this too can provide a different perspective.
3. Do a thorough walk-through
Buyers should thoroughly walk through homes, turning on every faucet, opening every closet and walking through all the rooms, even the garage, attic and basement. Take a close look at the moldings, fixtures and cabinets to make sure the handiwork doesn’t look shoddy, and closely examine the floors, ceilings and walls for damages. Finally, stand in the yard to examine the home’s exterior including the gutters and roof. If all checks out, don’t commit to purchasing the property before hiring an inspector to investigate the crawl space, chimney, HVAC system and roof condition and to make sure the property is up to code.
4. Scope out the neighborhood
While it can be financially tempting to buy in a fringe neighborhood and hope it develops, home buyers have to think about their quality of life in a neighborhood and be realistic about the likelihood of the neighborhood’s growth. Buyers should ask themselves how comfortable they feel walking around the neighborhood and whether the neighbors seem welcoming. They should also consider the school district because it affects property resale value even if they don’t have kids to attend the schools.
5. Make a pros and cons checklist
Buyers should think back to when they were first searching for a home: What criteria did they have then, such as the number of bedrooms or bathrooms, closet space, etc.? Make a checklist of the pros and cons of the house of interest. Evaluate everything from its size to its price and amenities. Does it meet the criteria?
6. Take a step back
In a competitive real estate market, many potential buyers get caught up in the bidding process, hoping to win the house. Buyers should remove themselves from the bidding and “buy now” mentality to think about whether they’d still want a house at the same price under different circumstances. Take a cooling-off period before making an offer to weigh the aforementioned checklist.
7. Read the fine print
Home buyers should ask sellers to see any disclosures before making offers; disclosures reveal issues with the home that range from a leaky roof to disruptive neighbors. Also ask to see documents relating to inspections, termite issues or any other reports. While all that fine print won’t be exciting to read, it can save buyers a lot of heartache and money down the road.
Home buyers should do their homework before taking the plunge into home-ownership to safeguard against concealed or undesirable aspects, just as most healthy marriages begin with periods of dating and engagement to get to know one another’s strengths and flaws. A home buyer should do the leg work before committing to a home to guarantee a happy life together.
22 Comment responses
#8 My wife tells me it’s the right house to buy.
Hah. That’s awesome
This is a great list, but number one is absolutely key! I have had so many clients make home buying decisions based on the fact that they can “afford” the mortgages; however, they forget about ongoing maintenance costs of homes (heating, cooling, repairs, external upkeep, etc). Just because the bank is willing to give you the mortgage, does not mean you should take it.
Exactly Shannon. I think it’s wise to purchase a house well under what the bank says you can afford. It’s more freeing to have a smaller mortgage payment. Being house poor is no fun (from what I hear).
Really great and thorough list! I think the first and the last points are the most critical. So many people don’t understand how much money is REALLY involved with not only buying but owning a home. And that many more people don’t bother reading all the fine print (or taking the time to understand it), and that can really come back to bite you.
So true. Thanks for stopping by Laura!
To get an idea what a fair price is, compare rental values on the house and think like a real estate investor. Price per square foot (measured by you) and price to rental value can be very enlightening, especially for comparison purposes.
Agreed Steve. Price per square foot is a great comparison tool.
Some good advice all around…and I really like #5, make a pros and cons checklist. Too often people only consider what good can come out of buying a home. In some cases, for some people, buying a home is not the best course of action at a given point in time.
No doubt James. Home ownership isn’t all it is cracked up to be. And it certainly isn’t the best move for all people.
It’s also important to note that it’s perfectly ok if you decide to rent….there is nothing with you. Renting carries such a negative connotation in our society. Just make sure you’ve thought your decision out all the way. For most young single professionals, buying won’t make sense.
The first step for any first-time home buyer is to understand your WHY.
Here’s a helpful list of questions first-time buyers should answer:
– How long am I planning to stay in this city? (be prepared to stay for 7 years before a house purchase makes sense)
– How mobile do I want to be in my life and career? (buying will typically keep your grounded in a particular location)
– Am I prepared to be a landlord? (if I have to move away)
– Am I prepared to devote the time to maintain a house? (remember your dad on Saturday afternoon?)
– Am I financially prepared to handle maintenance and repairs?
– How stable is your job? Do you have plans to go back to school?
Great thoughts Scott. I totally agree.
The costs involved in buying and selling can be really big – so staying there for at least 5 years is key.
And you are right on about a house eating into your weekends. I have a yard about 1/8th the size of what I grew up with. I still hate mowing and raking.
just sold our house after 30 yrs. ,owned it free and clear.just cant decide if we should buy or rent now .we are 59 yrs. old,retired.own a condo in FL. that we spend 4 mos. yr. at .we are renting a 1200 sq. ft. apt. heat incl. for 710 mo. looking at 1200 sq.ft. condo for 80.000 could pay cash for condo. or invest money and live off it
If you pay $80000 cash for a condo (plus closing and all the fun that comes with that), it will take you about decade to make that money back (just in the money you don’t have to pay for rent/mortgage). This does not including all the cost that come with ownership that you don’t have as a renter. I know you know this, having owned a home for as long as I’ve been alive! That said, if I were in the exact same situation, I am confident that I would just invest the money and live off it! Then again, if I owned my home free and clear, I’m not sure I would have sold it to begin with… at least not without a game plan!
Great list! I’ll have to revisit this post when I get in the position to be a first-time homeowner. Don’t imagine that’s going to happen while I continue to live in NYC.
When you move to Atlanta I’ll help you out.
Great list, Joel!
I love this post! I haven’t had the pleasure of looking to buy a house just yet, but I’m hoping some time in the next year or two….I’m so excited. Anyway, thanks for the great read, I’ll see ya around!
Sounds good J. Thanks for stopping by!
I am planning to buy a home next year, most likely a condo.Thanks for sharing this information,this is very helpful. We are currently looking for a realtor and mortgage broker and I think finding a right house to buy for my family is a great challenge!