What Do I Need to Know Before Buying a House?

By
Mortgage and Lending with Olympus Labs

Buying a home comes with long-term benefits, but it also has long-term costs. Roughly two-thirds of Americans who recently purchased a home have regrets, says a recent Harris Poll.

If you're in the market for a new home, this number may be a reality check. What do I need to know before buying a house? What mistakes should I avoid making?

Below we've included a home purchase guide of the top 6 things you should do before buying a house, from doing your research to thinking ahead.

1. Hire a Home Inspector

It’s crucial to hire a home inspector before you sign off on a property. While a home inspector will cost a few hundred dollars that you don’t want to spend while in the market for a new home, they’ll likely end up saving you thousands in the long run.

Home inspectors look at every element of your property, from the landscaping and wiring to the plumbing and the roof. You’ll know exactly what you’re working with before you sign any paperwork.

For instance, say you’re interested in a new home that’s just within your price range. You have a home inspector take a look at the property and he finds that the entire roof needs to be replaced due to damage.

This $10,000 repair will give you a few options: either you can walk away from the house or get the seller to agree to repair it before closing.

In either case, you’re in much better shape than if you had discovered the problem after the house was in your possession.

2. Think About the Future

A great home purchase isn't just one that meets your needs now - it's one that you think will match your lifestyle 10 years down the road.

Are you planning on starting a family or moving jobs? Is the location central enough to your frequent local spots?

Never look for a home with the mindset of satisfying an immediate need. Instead, frame your house search as an opportunity for growth in your life, whether that's having a child, exploring your city, or creating the home office you've always dreamed of.

3. Don't Downplay Home Improvement Costs

When you’re in the market for a new home, it’s easy to convince yourself that a fixer-upper in the perfect location will be worth the investment.

After all, with a few changes, your home will look exactly how you want it and have higher market value, right?

While purchasing a home with an improvement mindset isn’t a bad strategy, there’s no way of knowing how much all of your home improvements will cost. You’ll likely uncover unexpected obstacles which will make fixing up your home a lot more difficult than you anticipated.

Unless you’re willing to take on the additional risk, you might do better with a finished place.

4. Don't Neglect Your Financial Health

Sure, shopping for dream houses is fun, but it’s disheartening when you find out that a home you love is outside of a reasonable budget.

Before you start looking for a new home, spend some time determining how much you can afford. A solid metric for your housing expenses is 30%, meaning that all of your payments for mortgage, property taxes, and homeowners insurance should stay within this amount.

If your credit score isn’t looking great now’s the time to work on it. This three-digit number will determine whether or not you can qualify for a mortgage and what interest rates you’ll get. The higher the score, the lower the interest rates.

Lastly, take a look at your debt-to-income ratio, which is the amount of your monthly income that goes toward debt (think loans and credit cards, for example). A DTI at 35% or less is a great number to qualify for a mortgage.

5. Look at the Current Market

The housing market ebbs and flows, so a million-dollar property one day can lose 30% of its listing price over the course of a few months. Likewise, a reasonably priced house can become one of the most expensive ones in the area if its neighborhood suddenly sees a surge in demand.

Browse listing websites and look at market reports from your local real estate agencies to get a better understanding of how demand for homes in certain areas has changed over time.

If the market’s hot right now and you can afford to wait, you might save quite a bit in the long run. One of the mistakes to avoid is buying a home just because you can. Patience will reward you, even if it seems like it's the "right time" to buy.

6. Factor in Hidden Expenses

So you've found the perfect house right at the upper limit of your budget. If everything goes according to plan, you'll stay within your price range.

However, moving has too many moving parts to ever go according to plan. When you buy the house, even after conducting a home inspection, you're going to encounter hidden expenses, like repairs that need to be made after you move in or a paint job that got damaged from moving in.

Other costs that you may not think about when you buy a house include moving all of your furniture, buying new furniture pieces, closing costs, taxes, and homeowners associations.

What Do I Need to Know Before Buying a House? Explained

Buying a home is one of the most important decisions of your life, so it's natural to wonder "What do I need to know before buying a house?"

But as long as you've done your research beforehand and given careful thought to the future, you're in a position to make the best decision possible.

Interested in learning more about real estate? View other recent posts on our blog.

Comments (1)

Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Great information.  Thanks for sharing and have a wonderful day!

Jan 22, 2022 06:38 AM