10: Keep Your Money Where It Is
It’s not a good idea to make big purchases or even open new credit accounts three to six months prior to buying a new house. Any action that can change your credit profile can affect your future mortgage rate. Lenders want to see that you make reliable and responsible financial choices. NOTE: there are exceptions to every rule, if you have low or no credit prior to buying a house, a lender may suggest you get some sort of credit and make payments on time for six or more months to build your credit history.
9: Get Pre-Approved for Your Home Loan
It’s important to know the difference between being pre-qualified and pre-approved for a mortgage. Pre-qualification is the initial steps in the getting a mortgage. The lender asks basic questions about debt, income and assets without validation or verification. Simply put anyone can pre-qualify, but it doesn’t necessarily mean you will get approved for a mortgage.
Getting pre-approved means the lenders takes a deeper look at a buyer’s finances, debt-to-income ratio and credit history. By doing this, the lender can give more precise information on how much a buyer can borrow and detailed repayment information. Unless there are drastic changes in a person’s finances from the time of pre-approval to the actual purchase, a buyer is pretty much guaranteed a loan with a pre-approval. NOTE: again there are always exceptions to every scenario and rule.
8: Avoid a Border Dispute
Remember the old saying, ‘good fences make good neighbors’? Well a fence may not be necessary, but knowing property lines can be critical to preventing land disputes with your neighbors. It is also important because property tax is based on the size of the property. It is a good idea to get a survey done and have an accurate map drawn up for your records.
7: Don’t Try to Time the Market
The housing market is like a rollercoaster with many ups and downs and sharp turns, trying to predict the market is almost if not outright impossible. A buyer could miss out on the perfect house waiting for the perfect time to buy.
6: Bigger Isn’t Always Better
This actually depends on your plans for the house. If you plan on living in the house you buy for the rest of your life, then go ahead and buy what makes you happy. But if you potentially want to sell, bigger may not be the best. You may put a lot of money into a big house, but its return value may be limited to the housing prices in your area. Buyers working with an agent will do a housing comparison and your house may get overlooked no matter what upgrades or improvements you’ve made.
5: Avoid Sleeper Costs
Many home buyers focus on the mortgage costs and neglect to factor in property taxes, utilities, insurance and homeowner association dues. Let’s not forget about future repair and maintenance costs and the dreaded property tax increases. It’s important to talk about these sleeper costs with your agent so you can make an appropriate budget. Poor planning can lead to the potential loss of your home in the future.
4: You’re Buying a House – Not Dating It
Falling in love with a property can lead to bad financial decisions like buying a house out of your price range. When looking for a house, you have to be able to differentiate between house shopping with your emotions and house shopping with your instinct. Instincts will tell you that you are looking at a great house with great value. Emotions will see a dream house that is a must have at any cost. Buying a home is a huge investment and should be made with a level head and a great amount of education.
3: Give Your House a Physical
A good home inspector can be pricey but well worth it in the long run. Their sole purpose is to provide you with detailed information about the house you are about to invest in. A good inspector should be an unbiased third party with no affiliation to you or the seller. Anything the inspector finds can be used as a bargaining tool with the seller, or can prevent you from getting caught up in an on-going issue such as bad plumbing or a total electrical re-wiring job saving you a fortune in the long run.
2: The Secret Science of Bidding
Opening bids should be based on two things, what you can afford and what you believe the property is actually worth. It should be reasonable – you don’t want to offend the seller if you really want the house. A proper housing comparison of similar houses in close by neighborhoods can help with assessing the value of the home. Compare homes with similar square footage, style and age. Make sure you have some wiggle room in the event the seller counter-offers. Also, be strong enough to walk away if the counter-offer is higher than you are comfortable paying.
1: Stalk the Neighborhood
You have to remember when you’re in the market for a home, you’re not just buying a house, you’re buying the neighborhood and all that goes with it. It may sound crazy but you can learn a lot about a neighborhood and your potential neighbors just by driving down a street or two. It’s a good idea to drive through at all times of the day and night to get a good idea of how the neighborhood is at different times of the day. Give yourself a good idea of what you at a potential resident of the street will have to deal with on a regular basis. It’s also a good idea to check out the schools in the area even if you don’t have kids. The difference between a good school district and a bad one can affect the value of your home in the future. Find out what your commute would be, if it’s horrendous traffic or an easy ride each day, how far the local shopping areas are, do you like the shopping areas.
Again buying a house is a huge investment, not just financially but in lifestyle and how comfortable you will be in the house and neighborhood. Planning for the future is also important if you know you will not be in the house for long. Hope my tips have helped.
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