Being informed is important when you are making big financial decisions, and there are few financial decisions bigger than buying a home. Take the time to educate yourself about what you are getting into before you commit to buying any property. The following tips are here to help you get started.
Know your credit score.
Your credit score is one of the biggest factors in what your loan terms will be. Know your score before you ever try to get a loan, and take the time to repair it if it is lower than 700. A good score which leads to a low-interest rate can save you tens of thousands of dollars over the life of the loan. See how to raise your credit score to get better loan terms.
Have a lender pre-approve you before shopping.
What to do before buying a house includes getting pre-approved. In fact, it is one of the most important parts of the home buying process! Pre-approval means you should be able to get the loan as long as nothing changes about your financial situation or your credit score.
Shop the lender.
While getting pre-approved for a mortgage is a significant step for a first-time buyer so is shopping for the best deal possible. You will probably be paying the mortgage for a while so getting the lowest mortgage rate should be one of your prime considerations.
Know every expense.
There are a lot of fees that come with a home purchase above and beyond the mortgage. Insurance, repairs, association fees, property taxes – you should have the income and the budget to handle all of these things if they are relevant to your purchase.
Know what you want.
Do you want a home or an apartment? For many first time home buyers, this is one of the first dilemmas they will try to solve. In fact, many buyers will look at both because they can’t make up their mind. To make sound decisions, you should know the pros and cons of a property.
After the excitement of buying the home passes, you will have to live in it for years. Make sure you are shopping for a home that will meet your needs and your lifestyle.
Work with a skilled Realtor that knows your area.
Every neighbourhood has its unique qualities that you want to be aware of before you buy. An agent that is well-informed about the area will also know what homes there are worth, which will help you avoid overpaying for a property. You want a real estate agent who knows their stuff locally!
Understand the actual value of any property you are buying.
Working with a real estate agent that understands market values in your area is critical if you want to avoid overpaying for your house. In addition to the actual purchase price, there are other fees like appraisal and inspections that can cost you more when you don’t understand the value of the home. Sellers and banks may not be flexible should you ask about adjusting the price later, either.
Buy what you are comfortable paying for.
You may be cleared for a loan that is far above what you are comfortable paying for. Lean on the side of caution and mortgage only as much money as you are comfortable with. There are a lot of homebuyers who will mortgage themselves to the hilt only to find out later they are a slave to their home.
Verify all information in the listing.
You need to verify that all the information given about the home is right. Sometimes real estate agents put things in the listing that they may not have verified or may just not be aware of the facts.
Some of the more common issues that can crop up in a real estate transaction are understanding what stays with a home and what doesn’t. Many buyers, sellers, and even some real estate agents do not know what is considered a fixture and what is personal property.
Use a reputable home inspector.
Find a home inspector that is a part of the American Society of Home Inspectors, or someone your real estate agent knows and trusts. You want someone who knows what he or she is doing and is not motivated to miss issues to encourage a sale.
It is also advisable to find your inspector if you do not know your real estate agent well. The last thing you need is a real estate agent recommending you use their favourite inspector because he is not that thorough.
While most real estate agents are honest people, there are always a few bad apples in any industry you need to be on the lookout for.
Make sure all renovations are up to code.
If a renovation was done without a permit, it might not have been done right. No permit means that the work was not reviewed by an inspector, something you do not want in your new home. You might be wondering why a seller would bother not getting a permit for work done on their home. There are usually three reasons for this:
Buying a home without necessary building permits will become your issue in the future when you go to sell. It is advisable that you ask the seller to get the permits taken care of before you buy the home.
Be sure you understand any HOA that you will be part of.
Some homes are part of a homeowner association. All condominiums also have HOAs. These organizations are mandatory if you live in the area, so you will have to pay dues and rely on the association to take care of certain things, like maintenance of common areas. Some homeowners associations are great, some are not. Know what you are getting yourself into before purchasing in a neighbourhood with an HOA. One of the best ways to find out is by asking a few of the people who already live there.
Look for any water-related problems.
A home in good condition will keep water where it belongs. Exterior moisture should not be making its way inside. Water flowing through the pipes should be staying in those pipes. Any precipitation that falls on and around the property should be directed towards safe areas, like away from your foundation. Your roof should be functioning as intended. Buying somebody’s water issues is not what you want. Water issues have a direct correlation to market value, as well as marketability.
Make sure the electrical system is up to par.
Current building codes require modern electrical wiring. Most homes built before the 1930s are not up to standard unless they have been renovated. These old homes use knob and tube wiring, which can be expensive to bring up to code. Keep in mind that many lenders and insurance companies will not work with a buyer if the home has knob and tube wiring due to the hazards it creates.
Don’t stress the wall colours.
Many buyers don’t have a vision when looking at homes. As crazy as it sounds there are customers who will turn down a home that meets all the criteria they are looking for because they can’t see past the ugly mauve carpeting and the purple and green wall colours.
Don’t do anything to affect your financial situation.
Your pre-approval is based on the information given at the time of your application. Any changes, like getting a different job or taking out a car loan, can result in denial of the loan request when you go to purchase a house.
While I like to educate all of my buyers on making large purchases while buying a home there are many who do not. Making a large purchase is not a prudent thing to do when buying a home. This is one of the primary reasons buyers can be denied a mortgage after being pre-approved. This is not a pleasant experience!
Know the potential growth of your investment.
Buying a fixer-upper in an area that is growing more popular offers the possibility of an increase in the value of your home. In contrast, buying the nicest house in the area may not have much of an upside.
Consult with your real estate agent and ask them their opinion on the prospects for profit if the general area continues to rise in value. Will the home lag the market or be a stalwart? If the return on investment is necessary, this is surely something you should find out.