It’s so easy to get swept up in the idea(l) of being a homeowner or buying a home, we don’t consider taking practical steps before we start looking at homes. Take a look at these 9 areas before diving in!
1. Consider your life stage and the future. Don't necessarily buy for the life you have today. Chances are that buying a house will be one of the bigger financial commitments you'll make in your lifetime. Before starting to look at houses, consider your next 5-10 years. Are you planning on staying at your current job? Getting married? Having kids? Will you be an empty nester soon?
2. Have enough for a down payment and closing costs? What kind of shape is your credit? To get A rates, you must have a score of 740 or more.
3. Get pre approved by a lender. Resist the temptation to start looking at houses before you get pre-approved by a lender. It can be heartbreaking to fall in love with a home that is out of your price range.
4. Buy the house you know that you can afford. This can be different from the price that your mortgage company believes that you can afford. You may end up getting approved for a mortgage but be smart. You don't know what the future holds, so prepare for unexpected situations by being conservative. So what's the best ratio to use? Some lenders suggest that you can afford mortgage payments totaling about 1/3 of your gross income but others suggest closer to 28% for housing related costs including mortgage, insurance and taxes. There are a number of factors including your projected income, interest rates, type of mortgage and the market. Click here to ask me for a referral to an excellent mortgage lender!
5. When looking at homes, don't fixate on the purchase price. The purchase price is just one piece of owning a house: be sure to consider all of the costs associated with your potential new home. That includes the cost of insurance, homeowner association fees and real estate taxes - depending on where you live, those can quickly add up. And it's not just home improvements that can cost money: maintenance costs dollars, too. It's a good idea to ask questions about upkeep for extras like swimming pools, fancy heating and cooling systems and out buildings. Finally, make sure you're comparing apples to apples: a condo with a large fee that's priced low may be more costly than a higher priced one with lower fees while a cheap home with high taxes may cost you more per month than a more expensive one with lower taxes.
6. You don't have to buy a house. Build a spreadsheet that compares your rental costs to the cost of buying a home. Buying a home is a big decision and while it can be a sound financial investment, it’s not for everyone. There is a lot to consider, including the housing market, interest rates, timing and your future plans. You might want more flexibility or mobility, or your career and family plans may be in flux. If you're not sure about a neighborhood, consider renting as a test drive: I can help you with that, too.
7. Once you have gone through the steps above, make a checklist of your must-haves, nice-to-haves and other essentials. Then print copies of this checklist. Every time you visit a house, take the checklist along with you; take photographs so you can cross each item off your list. If you fall in love with the house and your checklist shows that the house has none of your must-haves, it will at least make you pause and think.
8. Look at ALL the expenses when you are budgeting for the house: When budgeting for the house, don't stop with principal, interest, taxes and insurance; add in utilities, cost of commuting and upgrades. Call the utility companies that service the house you are considering and ask for an estimate of what the cost will be, whether there are any budget plans available, etc. Will the gas budget for your car go up if you are moving further away from the places you frequently visit? Budget all of these expenses and see if you can still afford the house.
9. Research grants and other sources of funding. You may find many grants and funding sources you weren't aware of or that you thought income limits for qualifying for these types of funding would be very low. They may surprise you by the generous income limits on many of the options. There are many different options based on profession (grants for teachers, farmers, etc.) as well as the area of the potential house (whether it's in a rural area, high-poverty area, etc.) Research all the grants and funding options you are eligible for before you automatically decide you won't qualify for anything.
There are so many benefits to owning a home and buying before rates get too high, prices get out of reach and inventory reaches new lows. The stability that comes from owning a home and making it yours along with the statistics that show that children of homeowners do better in school than those who rent are all factors in choosing to buy.
As I always say, make a list of the pros and cons to help you make a well informed and solid decision!
Let me know if I can answer any questions for you or point you in the right direction for needed resources. If you're already qualified and want to start searching for a home, click here to search the MLS of homes in the Greater Puget Sound! I also have market reports for areas as well to provide you.
I can also help you find rentals if that's the route you choose. Either way, call, text or email me at 253.227.1609 or firstname.lastname@example.org.