Buying a new home is a big commitment, probably one of the biggest in your life, and when you decide you are ready to buy, it’s a time of real excitement. However, you can’t let your enthusiasm get in the way of common sense. There is a significant amount of time and energy, not to mention paperwork, that goes into buying a house, and it’s easy to overlook things. That’s why we wanted to provide some tips for buying a home.
Before You Start House Hunting
Before you start looking at potential properties, you need to take some preparatory steps.
First, you need to determine how much you can really afford to spend on a house. Most people look at their savings and think they are ready to go once they have enough for the down payment. But you need to calculate into your home price a number of “sleeper costs” that are part of any real estate purchase, such as property taxes, homeowners insurance, mortgage insurance, and closing costs. It’s important to add all those factors into the purchase price.
You should prequalify for a home loan before you start looking. Prequalification means you have spoken with a mortgage lender who has reviewed your credit history and indicated they are willing to give you a home loan up to a specific amount. Note that prequalification is different from preapproval. You want to prequalify to determine what you can spend and be confident you can get a loan. You don’t want to get preapproval before you are ready to make an offer to actually buy a home.
Once you are prequalified, use an online mortgage calculator to determine how your home loan payments would fit into your household budget. When you start shopping for a home loan, you will likely qualify for a larger loan than you really want to spend. Plan on buying a home at a price that is 25% lower than the loan you qualify for. That way, you will have enough to add to savings for emergencies and retirement.
When you start planning to buy a home, don’t make any big financial moves for six months before you are ready to buy. Any large financial commitments may affect your home loan eligibility.
What to Look for at an Open House
Once you start actually looking at properties, it’s easy to be carried away when you find a home with quaint fittings or interesting features. Try not to fall in love. Instead, pay close attention to the details of the property to identify flaws or problems that may require expensive repairs. You will want a professional home inspection before you buy, but you should also look for obvious problems on your own:
- Look for warped floors that could indicate excess moisture or flood damage. One easy way to check for warped hardwood floors is by placing a marble or ball bearing on the floor and seeing if it rolls.
- Look for cracks and fresh paint that may be covering cracks. Cracks could indicate a settling foundation or other structural problems.
- Check for water in the basement. If there is water in the basement, it could be because the home is in a flood zone or there is some other water problem that may not be solved with a sump pump.
- Look for problems on the roof. A visual inspection will tell you whether there are missing shingles or roof tiles, whether there is rot, or whether there are other problems that may indicate a repair is needed.
- Check the property for trees that may be a problem. Trees may overhang the house or need to be removed if they pose a threat to the property in a storm.
- Inspect the wiring and the plumbing. Check to see if the wiring is frayed or there are obvious rusted areas and leaks.
Getting Ready to Buy
Once you have found a house that looks perfect, you want to make sure there aren’t any hidden issues that will make you regret your choice. Here are some additional tips for buying a home:
- Check the boundary lines. You don’t want a dispute over property lines after you buy, so get a survey before you commit.
- Consider a geological survey. You want to make sure that the house isn’t in a floodplain or slide area because of the threat of heavy storms or potential earthquakes.
- Check the neighborhood. Be sure to take a close look at the neighborhood. You can get a feel for the area by driving through at different times of day, including rush hour and evenings. You should also check with the local police for incidents in the area and check out social media groups on Facebook and Nextdoor.
- Get the history of the home. Ask about previous repairs and improvements and learn as much as you can about when upgrades were made.
- Check with the homeowners association (HOA). Even if you aren’t buying a condominium, some areas have a local HOA to manage and maintain common areas. Find out about HOA fees and responsibilities.
When you are satisfied that you have made the right choice, you are ready to make an offer. Work with your real estate agent to make a competitive offer and navigate inspections, contingencies, and other details. Once the offer has been accepted, you can finalize the details of your home loan.
Remember that your local credit union can help. Credit unions are often regional, so they know the neighborhood. iQ Credit Union, for example, supports residents in Washington and parts of Oregon.
We can help you with your home purchase, starting with our simple Mortgage Paperwork Checklist. We are always here to help.