Essential House Buying Tips…
Buying a house is a monumental purchasing decision that many people only make a few times or less in their lives. Fortunately, the process does not need to be complicated or filled with unpleasant surprises. Before embarking on buying a home, remember to keep these essential tips in mind.
No matter if the housing market is up or down, homes are enormously expensive. As a result, it’s no surprise that financial considerations top the list of what you should think about before buying a house. Understanding the true costs of home ownership is chief among them.
You should examine the impacts of renting versus owning. You’re probably aware that over the long term, it costs more to rent than to own. This generally holds true. However, homeowners need to be prepared to fulfill responsibilities renters are not liable for. All utility bills, maintenance, cleaning, property taxes, as well as mortgage payments are necessities managed by the homeowner.
Zooming in on the details from this list will help you get a better picture of what your prospective house may cost beyond the closing price. Asking for a full breakdown of utility bills, for instance, lets you calculate your average monthly expenses. Request a copy of last month’s utility bills from the owner, realtor, or get an estimate from local providers. You should look at gas, electric, water, and trash costs. Don’t forget additional services you may want like internet, cable, and lawn maintenance or winter care.
Property taxes should be analyzed the same way. Don’t rely on estimates from realtors or owners. A hard look at what was actually paid out last year, and preferably the last five years, shows you what the real property taxes are, and how fast they ordinarily increase.
Figuring out a home’s structural condition may save you additional money as well. Bring inspectors to look at the home‘s foundation, wiring, roof, and other vital systems. Also, make sure you get things like a mold inspection and inspections for lead paint and radon. If the owner has done recent improvements or remodeling, verify the value with an inspector, or ask to see the construction receipts. Although many sellers are honest, there always some who try to inflate their home’s market price by overstating the value of upgrades.
Getting to Know the Neighborhood
Learning about the location of a potential home is just as important as collecting information about the house itself. Remember to take a look at statistics regarding crime, demographics, and education in the area you plan to move to. Normal climate data and potential natural disasters your property could face are worth analyzing too.
You can find out about the general state of the neighborhood by talking to residents, discovering community groups, or pulling up old news stories. Serious crimes in the area will always appear in reports by police and media, while neighbors are likely to mention nuisances, or confirm pleasant features. Visit the area during the day and night to ensure there are no odd surprises that only occur after sundown, or during daylight.
Although scrutinizing a home takes a great deal of work, it saves on potential disappointment and expenditures. Putting in your research ahead of time pays dividends for as long as you live in your home.
4 Money Moves Before Buying a Home
Remember the days when the only thing you needed to do to buy a home was to bring some I.D. and stand in line somewhere? The days of “E-Z Lending!” and “No Money Down!” have long given way to an era loaded with banks and lenders that actually require that potential homeowners have the ability to pay for the homes they’re trying to purchase. If you’re in the market for a home, you need to make sure that your financials can withstand an underwriter’s scrutiny. Check out the following four money moves that you’ll need to make before even thinking about buying a home.
Raise Your Credit Score
If you’re planning on applying for a mortgage, but your credit scores are barely there, or smudged, you’ll need to put in the work to raise them to a number that lenders are comfortable with. Borrowers with high credit scores are rewarded with lower interest rates and less money required for down payments. Pull your reports from all three CRA’s (credit reporting agencies). Pay down your credit card debt. If you’re thinking of paying off old debt or charge-offs, check with the creditor in question to make sure that once you pay, they report the debt to the CRA’s as “paid in full.” Paid charge-offs are often reported as “new,” a notation that will result in a lower credit score. Dispute any errors on your reports directly with the CRA’s.
Pay off Debt
If you’re carrying sizable debt, it’s going to negatively affect the amount of money that a lender is willing to lend you. If you have a lot of revolving debt, pay as much of it off as you can. Not only will it make you more attractive to lenders, it will save you money over time since revolving debt like credit cards carries much higher interest rates than mortgages do. Paying off that money up front will save you thousands of dollars in interest in the long-term.
Save for (or be Gifted With) a Down Payment
If you’re going for an FHA loan, the minimum down payment required is 3.5% of the purchase price, provided you have a credit score of at least 580. If your score is lower than that, you’ll need to put down 10% (another reason to get those scores up!). Traditional loans can require as much as a 20% or more down payment. Figure out how much you’ll need for a down payment and aggressively go about saving for it.
You can receive familial down payment assistance in the form of a gift, but make sure that it is accompanied by a “gift letter,” which will include the amount being given, the relationship of the person giving you the money, clarification that it’s actually a gift and not a loan, the property address, and the signatures of all involved parties.
Determine a Realistic House Budget
Everyone wants to buy a dream house, but that dream house can quickly turn into a true nightmare if you bite off more than you can chew in terms of house price. Assess all of your monthly expenditures including your monthly take-home pay, outstanding debts, home maintenance expenses, taxes, school fees, utilities, etc. As you can see, the list is long, so when you’re figuring out what you can afford for a monthly mortgage, include all of those other expenses in your calculations.