Buying a house may be the single largest purchase you ever make, as well as one of the most life-changing decisions. The process can be long and difficult, but if you take the right steps, you can find an affordable home that you and your family will enjoy for years to come..
Making the Decision to Buy
Because purchasing a home is a costly venture, you should be certain it’s the right option for you. Before committing to buy, ask yourself these questions:
- Is buying better than renting? If you are only planning on staying in this location for a set amount of time, renting may be a better idea. It can take you a few years to pay off your closing costs and build equity in a home, so if you sell too soon after buying, you could end up owing money.
- Can I afford to purchase a house? Of course, you’ll likely secure a mortgage to finance the bulk of the purchase price, but lenders will require that you put some money down. Most banks prefer a down payment equal to 20 percent of the purchase price, but will sometimes settle for 10 percent if you opt for mortgage insurance. Certain government subsidized loans put buyers into a home with less than 10 percent down, but you must qualify for these rates. In addition, you’ll likely run into repairs or other hidden charges associated with the home once you move in, so you do need a sizable chunk of change in cash to purchase a house.
- Is now the right time to buy a house? Housing markets shift depending upon a variety of factors, and your area will have unique aspects that make purchasing a house more or less appealing at any given time. When considering the option to buy, take a good look at the market. If houses in your price range are being sold within a few days of listing, it’s a seller’s market. That means you’re not likely to have much room to negotiate on the price and may even find yourself in a bidding war with other buyers. On the other hand, if houses are sitting on the market for months, sellers are more motivated to accept offers, so you might be able to score more of a deal on a home. Understanding your market can give you clues on how to pitch your home offer.
Choosing the Right House
There are many factors to consider when choosing a house to purchase. Of course you and your family should like it on an aesthetic level, but consider the neighborhood as well.
Investigate the quality of the school system. This can have a bearing on property and resale values. Generally, the higher the schools are rated, the more desirable an area is to live.
Also, consider the safety of the neighborhood. Look up crime statistics for the area or talk to the local police. You can also learn a lot from driving through and observing the neighborhood at different times of day. If people are out on the streets or enjoying their yards, you can usually assume they feel safe.
While you’re out checking on safety, also look at the state of the area homes. Are the majority of the houses well-tended and in good repair? Are neighbors prone to leaving junk or old, non-operating cars around the premises? Run-down homes or those that lack curb appeal could lower the value of the home you want to purchase, even if it is a bright spot on an otherwise bleak street.
You should also carefully consider the price of the house. Experts recommend allocating no more than about 30 percent of your monthly income toward mortgage payments, but you may want to pay less, depending upon other expenses, such as the cost of heating and electricity in your area as well as property taxes. It’s always a good idea to have your finances worked out before you make an offer.
Preapproval for a Mortgage
Before trying to secure a mortgage, check your credit score. The better your score, the more you will be able to borrow. You may even be able to get a better interest rate with sterling credit.
Also, speak with lenders about a pre-approval letter. This will provide you with an estimate for the size of mortgage you will be able to get, giving you an idea of how much you can afford to pay on a new home.
Making an Offer
Once you find a house you’d like to purchase, speak with your real estate agent. They will write up a formal offer and send it to the seller’s agent.
It is standard to offer five percent below the asking price, but each situation is unique. You should be open to price negotiation, particularly if you’re making a low offer.
After You Buy
Homeowners insurance is always required if you mortgage a home and is a good idea even if paying cash. This type of coverage provides peace of mind and security by paying for repairs when your home is damaged under a variety of circumstances. Homeowners coverage will also protect you in the even that someone gets hurt on your property and tries to sue you.
To compare rates and find the best insurance for your situation, turn to Bolt Insurance. We make it easy to get a quote and secure coverage from top-rated carriers. Just click here to get started.