Don’t Shop Until These are Done
Have you seen the Tom Hanks movie The Money Pit? Hanks’ character Walter and his girlfriend suddenly find themselves in need of a place to stay when they stumble across what appears to be a fantastic house in the country at an insanely cheap price. They rush into the decision, and, long story short, they spend a lot of money, emotional energy, and time fixing the house to something that’s livable.
Don’t be like Walter. Take your time before the biggest purchase of your life, and keep in mind these tips long before you begin house hunting.
Fix your credit
It is estimated that 30% of Americans have poor or bad credit. Since your credit score is a big determination for whether you can receive a loan, and the terms of that loan, you need to make sure it’s in great order. Before you go shopping for a loan, head over to Credit Sesame and give your score a thorough check. This should be done well in advance so you can hire a credit repair service and give them time to work before you apply for a loan.
Also Read: What credit score is needed to buy a house?
Logic prevails over emotion
You probably have your dream home in mind. Maybe it has a white picket fence. Maybe it has vaulted ceilings. Whatever it is, it’s a good dream, but remember it’s something to work toward. House hunting means you’re going to see a lot of great houses under, at, and over your budget. Nicer houses almost always cost more. Don’t fall in love with your dream house and put yourself into dire financial straits because it’s too expensive.
Whatever percent down
20% is a hard and fast rule, right? Sort of. But when the average home in the US is going for $200,000, it’s hard for many people to come up with $40,000 of cash that they can plunk down on a house! There are programs, depending on your eligibility and location, which can help you get into a home with less than 20% down (and still avoid that pesky PMI). The right mortgage lender can help you find the right loan for you.
Location is truly everything
In real estate, they say location, location, location. But it means something different to you, the buyer. For you, it’s all about the commute to work, and convenient access to the things that you love. The longer your commute, the more it will cost in money (gas and maintenance) and time. Dive deep into these factors, because that 45-minute commute may not seem like much now, but what if you have kids in a couple of years that want to play after work?
Shop around and negotiate
This applies to the houses you’re looking at, but even more so to the terms of the loan. Or, more importantly, what’s added onto the loan. Closing costs can be huge, but they’re sometimes not determined by the lender. You can choose from a variety of them, and reduce your costs considerably. Utility providers (in some areas), insurance, and other factors should all be priced and negotiated to get you the best deal.
A new home isn’t a maintenance free home
When buying a home, many people want to avoid the fixer-upper. Old homes, after all, generally need more work than new homes. New homes, however, aren’t always maintenance free. New construction generally comes without a landscaped yard, no fences, and untested appliances (if they’re even included) and fixtures. A warranty may cover them, but even if they don’t cost you money, they cost you time and energy.
Renting isn’t always bad
If you have read enough personal finance, you have probably heard over and over, “Renting is throwing away money!” That’s not always the case. Renting can often cost less than owning (after you figure in insurance, repairs, utilities, maintenance, and more). It’s also more flexible than owning a home. Keep in mind that all things considered, your home won’t actually appreciate in value as quickly as you hoped, and renting (for a couple more years) might be the best option.
After you have prepped yourself sufficiently, taken care of any credit problems, and you fully understand that the true costs of owning a home go far beyond the mortgage payment, then it’s time to get pre-approved for a loan. Talking with a lender can help you understand the process, and remember, it can often take over a month from the time you make an offer to the time you get to move in.
