Owning a home is the American dream but home ownership also comes with many responsibilities and some headaches. Here are the top ten things you should know when buying a house.
First, there’s a high transaction cost associated with buying and selling property and you’ll pay capital gains taxes if you buy a house and live there for less than two years. Even in a roaring real estate market you could end up losing money if you sell your home two years or sooner from the time of your original purchase. Buy a home only if you can commit to staying longer than two years.
Second, since you, like the majority of homeowners, will need a mortgage you’ll want to shore up your credit, making sure your credit history squeaky clean. By obtaining a copy of your credit report several months before you start house hunting, you’ll be able to verify the facts and fix any problems you see.
Third, when buying a house, look for one you can really afford. This means looking at house that are worth around two-and-one-half times your annual salary. You can use an online calculator to get a better understanding of how your income, debts and expenses affect the housing you can afford.
Fourth, in an ideal world home buyers would be able to put down 20 percent of their home’s purchase price. Just because you can’t afford to do so doesn’t mean you won’t still qualify for a mortgage. A variety of public and private lenders offer low-interest mortgages that require smaller down payments. So don’t sell yourself short.
Fifth, it helps to buy a house in a good school district. The better the school district, the better the boost in your home’s property value when it comes time to sell your home. Even if you don’t have children, you’ll be glad you’re buying a house in a good school district.
Sixth, despite the unprecedented access to home listings seen on Zillow.com and other comparable websites, new home buyers are better off working with an experienced real estate agent. Working with exclusive buyer agents who have your interests at heart will help you with strategies as you go through the bidding process.
Seventh, it’s usually better to pay on additional points at closing in exchange for a lower interest rate on your mortgage. This is also why it is beneficial for homeowners to live in their home at least 3 or 4 years as a lower interest rate on their mortgage will save them more money in the long run.
Eighth, be sure to get pre-approved for financing before you go house hunting. Save yourself the grief of looking at houses you can’t afford. By getting pre-approved for financing you’re in a much better position to make a serious offer when you find the house that’s right for you. A lender can give you pre-approval based on your credit history, debt and actual income.
Ninth, it pays to do your homework before bidding. Before you make your opening bid, consider the sales of similar homes in the past couple of months. If those homes sold for 6 percent less than the asking price, your bid should be about 8 to 10% lower than the seller’s asking price.
Finally, when buying a house, be sure to hire a home inspector. An experienced home inspector, one with experience in doing home surveys in the area, can point out potential problems that could require costly repairs in the future. Lenders will require a home appraisal to determine whether the house is worth the price you’ve agreed to pay. Getting a home inspection is much like getting an experienced and trusted mechanic to tell you the true condition of the car you’re about to buy. Better to know the condition of your home before you buy it than to discover surprises later.