The 10 things you need to know before buying a house

1. Don’t buy if you can’t stay put for at least a little while (unless you want to be a landlord)If you can’t commit to remaining in one place for at least a few years, then owning may not be for you. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner.There is a caveat to this. If you like the investment and the rental income will cover your expenses with the added possibility of growing equity, you could be better off buying rather than continuing to pay rent.Analyze this one carefully! I  always tell my customers the same thing I tell myself when I’m buying a home – “If for some reason you couldn’t pay the bills, would renting the home at least cover the overhead, or even better, would it cover the overhead and provide income.” Never buy a property that won’t at least pay for itself if it had to. 

2. Start by shoring up your credit

Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible.A few months or even years before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover. If you have any negative or derogatory information on your report it can take months or years before your credit will recover after you have successfully removed the information.I recommend using CreditKarma, it’s a free and easy way to keep on top of your credit. In this day in age when a persons credit score is one of their most valuable assets I am amazed by how many people don’t know their own credit score. If you aren’t checking your credit report/score at least once a month, you should be. 

3. If you can’t put down the usual 20 percent, you may still qualify for a loan

There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a small down payment. Even for condos which traditionally require a larger down payment than single family homes, we are seeing some lenders offering mortgages with as little as 5% down. 

4. Before house hunting, get pre-approved

Getting pre-approved for a mortgage will save you from the grief of looking at houses you can’t afford and put you in a better position to make a serious offer when you do find the right house.Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. 

5. Figure out your overhead

Remember to look at the big picture. While buying a house is a great way to build wealth, maintaining your investment can be labor-intensive and expensive. When unexpected costs for new appliances, roof repairs and plumbing problems crop up, there’s no landlord to turn to, and these costs can drain your bank account. Make sure you factor in unexpected costs into your budget.To get an idea of what you’ll pay in insurance, pick a property in the area where you want to live and make a call to a local insurance agent for an estimate. You won’t be obligated to get the insurance, but you’ll have a good idea of what you’ll pay if you buy.For an idea of what you’ll pay in taxes, Zillow publishes property-tax information for homes all over the country. Just remember that exemptions and the intricacies of local tax law (such as Florida’s Save Our Homes value cap) can create differences between what a homeowner is currently paying and what you can expect to pay as a new homeowner. So consider whether you’re ready for the expense and effort of homeownership before pulling the trigger. 

6. Find out how much you’ll likely pay in closing costs

The upfront cost of settling on your home shouldn’t be overlooked. Closing costs include origination fees charged by the lender, title and settlement fees, taxes and prepaid items such as homeowners insurance or homeowners association fees. You can see what closing costs average in your state by looking at Bankrate.com’s annual closing cost survey. 

7. Aim for a home you can really afford

The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you’ll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford. Use Bankrate’s  mortgage calculator to see what your payment would be. To get a sense of the maximum you should spend, use this home affordability calculator to get a feel for the maximum amount you should spend, including taxes and insurance home affordability calculator. In some areas, what you’ll pay for your taxes and insurance escrow can almost double your mortgage payment.Look at your budget and determine how a house fits into it. Fannie Mae recommends that buyers spend no more than 28% of their income on housing costs. Go much past 30% and you risk becoming house poor. 

8. Buy in a district with good schools

In most areas, this advice applies even if you don’t have school-age children. Reason: When it comes time to sell, you’ll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.

9. Choose carefully between points and rate

When picking a mortgage, you usually have the option of paying additional points — a portion of the interest that you pay at closing — in exchange for a lower interest rate. If you stay in the house for a long time — say three to five years or more — it’s usually a better deal to take the points. The lower interest rate will save you more in the long run.And most importantly… 

10. Get professional help

Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent.Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.Feel free to call, text, or email Lori, Brendon, or any of our associates for more information.