I know that buying a new house may be one of the biggest decisions in someone’s life. To some, it’s a sign of being a responsible adult. This move is so important, that’s why 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.
There is a popular guideline called “28/36 Rule” it says 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 (housing, car or student loan) The mortgage lenders use this to assess your borrowing capability. If your debt to income ratio exceeds these limits then there is a chance that you need to pay a higher interest rate or worse, you might not be eligible to get a loan. But before we get too excited, let’s discuss first what are the things a buyer should look in to before purchasing their dream house.
This is one of the most important things that you need to take care of from the start even years before you purchase a house. A good credit rating can go a long way more than you can imagine. Know your credit score, this is the first thing you should do before you even try to get a loan. If your score is lower than 700, try to raise it first. Because a good score can save you thousands of dollars. The better score you have, the lower the interest they will give you. So work really hard for that good 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 will change in your financial situation and credit rating. This is also an edge for you when it comes to 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 not the case 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 are going to pay for that mortgage probably in 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.
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 needs to discuss. Your family’s lifestyle will help you all in deciding which one is best to fit your needs. Having an actual house will give enough room for everyone. While condo in the other hand have limited space. So for you to have a clear differentiation of the two, here are the pros and cons:
Maintenance-Given that house is bigger, it means bigger responsibility for the owner to do the upkeep. That includes the maintenance of your lawn, backyard, mowing the grass, weeding the flowers and plants. And yes don’t forget the unlimited leaves during fall, that you need to endure. And if you have a swimming pool then that is also a big responsibility and sure it is hard and expensive to maintain. While this is what’s good about a condo, you just need to pay the maintenance fee so you don’t have to worry about cleaning everything outside your home. And since you just have limited space, keeping your home clean is not that hard.
Mortgage - When it comes to mortgage, buying a house is easier. You just get the type of mortgage you want and that’s it. While in Condo you need to verify upfront that you will be using certain types of loan products.
Location- Again the buyer’s lifestyle will have a big impact in choosing the location of your home. Do you like urban kind of living? Then a condo might be your best bet. But if you love a more peaceful and not so crowded neighborhood, then you might be considering buying a house.
Privacy- This is a big factor that you might want to consider. Living in a house gives you full privacy. You can use everything inside your house and your backyard all by yourself. Unlike in a condo, you have shared amenities like swimming pool, clubhouse, playground, fitness center, hot tub, sauna.
Rules- If you have a house, you will make your own rules. You can make whatever changes you like in your home. 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 in one roof. You can also invite as many visitors as you want. But in a condo, there are certain rules that you need to follow or else you will get penalized. There are condominiums that only allow limited numbers of occupants. And some rules like you should not hang your laundry outside the balcony, things like that.
Getting the Best Real Estate Agent and Home Inspector
These people must be knowledgeable enough to let you understand thoroughly everything about buying a home. They bust be trustworthy and know exactly what they’re doing. It’s best if they already have a successful sales history and been on the business for a long time. A real state agent must know the market values in the area, this will help you avoid overpaying the house. While the home inspector, on the other hand, is better if he or she is a member of the American Society of Home Inspectors. They have a good reputation and experience in their business and that’s a good factor.
Yes, insurance is very important even before you purchase your new abode. Buying insurance together with buying a new house may sound 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 be asked to provide some proof that you have prepaid a year worth of coverage before the lender continues to closing. Lucky you if you can pay off in cash then you are not required to purchase home insurance before closing. But for most who need a mortgage, insurance is almost a must. 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 happened. Being said, standard homeowners insurance may suffice. This mostly 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 that you want to add more coverage in your policy, you can always make changes. Better ask and talk to your insurance agent about all the things you want in your insurance plan to come up with the best option there is.
Once you and your family have already decided what kind of abode you are getting (house or condominium), you’ve surely made a big consideration with regard to the location of your new house. The most basic 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 very important. Remember, you and your family will be living there for so many years. Think about all the things that you all normally need to do, where you all usually want to go and hang out. It will cost you all less money if most of your necessities are just 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.
Having a decent neighborhood can make a great impact to you and your family’s peach of mind. Knowing that you have a good neighborhood 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?
Small details that usually taken for granted
Renovations- All renovations must have a permit. If there are none, then it means that the renovation was not checked by an inspector. Some owners don’t want to get a permit because it will cost them more money. They need to pay permits for electrical, plumbing and building inspectors. And because of the changes in the house, there is a chance that the assessed value of the house will go up and that means higher taxes. So make sure all permits are good before buying a house. You might sell it as well in the future and you surely don’t want to have any problem 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. Most especially if you are buying an old house. Some older house still uses knob and tube wiring. Insurance companies don’t want to work with buyers if the house has these kinds of wirings because it’s hazard-prone. Also, make sure that all water pipes are in good condition. You certainly don’t want to have a leakage problem to deal with in your new home. And lastly, when choosing a house don’t focus too much on the house’s interior color and flooring. Often times, the buyer disregard picking a house 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 are cheaper. That buying a newly renovated house.
Need further guidance in determining what you need, or just ready to get information on the best insurance coverage you'll be needing? No worries. Contact us today and we'll get things sorted out for you.