It is important when you start looking for a home to first consider what you need-are you looking for more bedrooms in a quiet area of town, or do you prefer a smaller space in a trendy neighborhood? How long do you plan to stay, will you outgrow your home quickly? While considering your new home’s potential for the future, it is important to not equate bigger with better, large homes often appeal to only a small percentage of the market and you do not want to limit yourself when you attempt to sell.
When searching for your home, budget plays a major factor in where you will live and what you can afford. One thing homebuyers are encouraged to do is to get Pre-Approved for a mortgage, this is a step beyond pre-qualifying since you will actually be approved by a lender to get a loan for a certain dollar amount. This will help narrow down your search since you will know exactly how much you can spend.
Not only does pre-approval help with buying a home, but you can also employ a set of checks and balances when calculating additional expenses. Many homebuyers forget to consider utilities, mortgage taxes and HOA fees when planning to make an offer. You can avoid the disappointment of going over your budget by calculating these expenses in advance and subtracting them from your monthly costs.
One additional piece of advice when preparing to purchase a home is to keep your money where it is. Often times homebuyers get will begin to move money from various accounts and this will delay the approval process when lenders require letters of explanation on the origin of the funds, or require that the money is in one location for at least 60 days prior to making a purchase.
Don’t Be Afraid To Investigate
You are making a big commitment when buying a home; make sure you know the facts. If you find a home you like, in a neighborhood you are unfamiliar with, spend time in the neighborhood! Talk to your potential neighbors and visit the local restaurants and stores. Chances are, if you find something you don’t like, the home will seem less appealing and you will save yourself a lot of heartache down the road. On the flipside, by spending time in the neighborhood, you might even find other homes that you like even more.
If you are a first time homebuyer, or if you bought your first home several years ago, the sheer number of mortgage products can seem daunting. Don’t be afraid to shop around for rates and products and ask a lot of questions. What worked for your friend or sibling may not be the best choice for you, so seek out professionals. Different programs offer different benefits; lower down payments can mean higher mortgage payments and the addition of PMI (private mortgage insurance). Are their early payoff penalties associated with your mortgage?
As with any major purchase, you want to make sure to protect yourself against bad investment. You would never buy a car without taking it for a test drive, would you? This is the equivalent of a home inspection before finalizing your contract. Find a professional inspector you trust to go through the home and search for any structural damage or other items that may not be apparent to a layman. The inspection can cost $300-$600 and can save you thousands of dollars in the long run. Any discoveries made during the inspection should be corrected prior to the sale or a date should be set of when the items will be fixed and written into the contract.
You should also make sure your lawyer fully explains the contract to you, and that you understand all elements of the agreement prior to signing. This will help avoid any confusion on closing day and you will fully understand your obligations as well as those of the seller.