Buying a new house is one of the most life-changing decisions in someone’s life, so rushing to it is a no-no. According to real estate experts, one of the biggest mistakes first-time home buyers make is buying a house more than they can afford.
First Things First
The “28/36 Rule” is a popular guideline stating that you must spend no more than 28% of your monthly gross income on housing costs and no more than 36% on your total debt. If your debt-to-income ratio is above these limits, you may need to pay a higher interest rate or worse and may not be eligible for a loan.
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Your credit standing is one of the most important things you need to take care of from the start, even years before purchasing a house. A good credit rating can go far more than you can imagine. Know your credit score. Knowing is the first thing you should do before getting a loan. If your score is below 700, raise it first because a good score can save you thousands of dollars. The better your score, the lower the interest they will give you. So work hard on that excellent credit rating because it will surely pay off.
A lender’s pre-approval can make your application easier. Pre-approval means you should be able to get the loan as long as nothing changes in your financial situation and credit rating. Getting pre-approval is also an edge for you when competing with other buyers in case you have some competitors with the house you’re eyeing. For you to get approved, the lenders will verify employment, income, and credit. But most of the time, this is different with a pre-qualification.
Look for the Best Deal in the Market
Spend time looking and shopping for the best deal. Check the package, not just the rate of the house. Be vigilant in choosing the lowest mortgage possible. Remember, you will pay for that mortgage for a long time. Check the annual percentage rate or APR. Insurance, repairs, association fees and property taxes are some examples of additional expenses when buying a home.
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House or Condominium
When choosing what kind of home you want to live in, this is one of the first questions you and your family must discuss. Your family’s lifestyle will help you decide which fits your needs best. Having an actual house will give enough room for everyone. While Condo, on the other hand, has limited space.
Pros and Cons:
Given that the house is larger, the owner is more responsible for upkeep. That includes the maintenance of your lawn, and backyard, mowing the grass and weeding the flowers and plants. And yes, remember the unlimited leaves you need to endure during fall. And if you have a swimming pool, that is also a big responsibility. Sure, it is complex and expensive to maintain.
While this is good about a condo, you need to pay the maintenance fee, so you don’t have to worry about cleaning everything outside your home. And since you have limited space, keeping your home clean is pretty straightforward.
When it comes to mortgages, buying a house is more accessible. You get the type of mortgage you want, and that’s it. While in Condo, you must verify upfront that you will use certain loan products.
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Again, the buyer’s lifestyle will have a significant impact on choosing the location of your home. Do you like the urban kind of living? Then a condo might be your best bet. But if you love a more peaceful and not-so-crowded neighborhood, consider buying a house.
Privacy is a significant factor that you should consider. Living in a house gives you complete privacy. You can use everything inside your home and your backyard all by yourself. Unlike in a condo, you have shared amenities like a swimming pool, clubhouse, playground, fitness center, hot tub, and sauna.
f you have a house, you will make your own rules. You can make whatever changes you like in your home. If you want to drill on your wall, you can do it. It does not matter if there are twenty-five of you in the family living under one roof.
You can also invite as many visitors as you want. But in a condo, there are specific rules that you need to follow, or else you will get penalized. Some condominiums only allow limited numbers of occupants. And some limitations like you should not hang your laundry outside the balcony, things like that.
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Getting the Best Real Estate Agent and Home Inspector
These people must be knowledgeable enough to let you thoroughly understand everything about buying a home. They must be trustworthy and know what they’re doing. It’s best if they already have a successful sales history and have been in the business for a long time.
A natural state agent must know the market values in the area. Knowing will help you avoid overpaying for the house. While the home inspector, on the other hand, is better if they are a member of the American Society of Home Inspectors. They have a good reputation and business experience, which is a good factor.
Yes, insurance is essential even before you purchase your new abode. Buying insurance together with buying a new house may sound like a lot of money involved; however, if you are going to finance your new place, your lender will require you to purchase homeowners insurance before settling your mortgage.
Usually, you will need to provide some proof that you have prepaid a year worth of coverage before the lender continues to close. Lucky you, if you can pay it off in cash, you are not required to purchase home insurance before closing. But for most who need a mortgage, insurance is almost a must.
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So how much coverage do you at least need? The answer is it depends on your lender. Most lenders require that you purchase enough coverage to rebuild your home again in case bad things happen. Standard homeowners’ insurance may suffice with this in mind.
Homeowners insurance mainly covers
- Hazards ( hail, windstorm, fire, lightning, theft, vandalism, smoke damages, explosions, falling trees )
- Personal Belongings (furniture, appliances, jewelry, artwork)
- Personal Liability- When someone gets hurt inside your property. Example: A delivery guy accidentally fell on your front door.
If, in any case, you want to add more coverage to your policy, you can always make changes. Better ask and talk to your insurance agent about everything you want in your insurance plan to determine the best option.
Once you and your family have already decided what kind of abode you are getting (house or condominium), you’ve undoubtedly considered the location of your new home.
The essential things to think about are
- A place near your family’s work
- Schools nearby
- Supermarkets and malls
- Police Stations / Fire Station
Having these near your house is critical. Remember, you and your family will live there for many years. Think about what you typically need to do and where you usually want to go and hang out. It will cost you less if most of your necessities are near. And one of the most important things is in case of emergency, if the police station or any hospitals near your end, believe me, it’s a lifesaver.
A decent neighborhood can significantly impact your and your family’s peace of mind. Knowing that you have a good community will leave you at ease when you’re away for work. Especially if you have kids, growing up in a peaceful and healthy community can affect them more than you think. They may end up being playmates with your neighbor’s kids.
Who knows, right?
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Tiny Details That Are Usually Taken for Granted
All renovations must have a permit. If there are none, then it means that an inspector did not check the renovation. Some owners want to avoid getting a permit because it will cost them more money. They need to pay electrical and plumbing permits and building inspectors.
And because of the changes in the house, there is a chance that the assessed value will go up, which means higher taxes. So make sure all permits are good before buying a home. You can also sell it in the future and avoid any problems in the long run.
Electrical, Water and Interior Factors
These factors can affect your house investment. Check the electrical wirings to ensure that all are already modern types, especially if you are buying an old house. Some older home still uses knob and tube wiring. Insurance companies only want to work with buyers if the house has these kinds of wirings because it’s hazard-prone.
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Also, make sure that all water pipes are in good condition. You certainly want to avoid a leakage problem in your new home.
And lastly, when choosing a house, focus on something other than the interior color and flooring. Often, the buyer needs to respect picking a place just because they aren’t pleased with the color of the paint. Little do they know that these are the easiest things to change. Buying new paint and carpets is cheaper. That purchasing a newly renovated house.
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