There are way more than 10 things you need to know before you buy a house, but just as with any new venture, you need to have a foundation upon which you can build. Going out into the housing marketplace armed with the basics will definitely help you navigate the world of home buying, with its peculiarities and nuances. Buying a house is a big deal, and it requires a basic knowledge of the industry, the lingo and the players.
It’s Not Free
Sure, you know that you have to pay for the house itself, but there are other costs involved in buying a house. There are a multitude of fees, plus the appraisal and other closing costs that can run into the thousands, which need to be considered.
You Need Good Credit
While you may have been able to get a house in the early 2000s or late 1990s if you had a low credit score, those days are over. In addition to having a good credit score, you stand a better chance of getting your offer accepted if you start house shopping with a mortgage pre-approval letter from your bank.
Save Up a Down Payment
Most banks require a 20 percent down payment on a home loan, which is going to affect the type of house you can buy as well as the location. In addition to increasing the odds you get approved for a mortgage, having 20 percent down also lowers your payments because you won’t have to carry additional insurance called PMI, or private mortgage insurance.
Get Your Own Inspection
Your bank will require that an inspection be done to make sure the house is worth what they’re lending you. To be absolutely sure you aren’t walking into a nest of problems, find and hire your own inspector to thoroughly go over the house from top to bottom before you sign the final papers.
Hire a Realtor with References
If you do use a Realtor, get references and check them; you want an agent who’s knowledgeable about the market you’re interested in and really does look out for your best interests. An experienced Realtor should be well-versed in mortgage deals and appraisal practices, understand title issues, short sales and foreclosures, and help you avoid potential problems.
To keep the house hunting process enjoyable, get realistic about how much of a monthly house payment you can comfortably afford. Forcing yourself into a higher payment bracket just because you’ve been looking in neighborhoods you have no business living in can create a lot of stress on your shopping experience and then later on as you try to keep up with those payments.
Look at all the details in a mortgage contract. While the low interest rates and reduced monthly payment may look really attractive on an adjustable rate mortgage, consider if you can keep up the payments if interest rates rise. You might be better off with a slightly higher fixed rate, knowing that your monthly payment won’t go up in the next 30 years.
Not All Real Estate is a Good Investment
It used to be that real estate was always considered a great investment because it increased in value over time. The recessionary housing market that swept the nation in 2008 proved that theory wrong. If you’re buying a house to invest your money, look hard and long at the long-term picture. It’s not a guaranteed slam-dunk anymore.
Think About Your Future
It may be difficult to see beyond moving day and the thrill of taking over a new property and making it your own. But it is vital to consider future consequences and when you may want to move again. Your property will hold its value better when it’s located in a good school district and where development is stable.
You Can Negotiate
Sellers and their agents typically price a house higher than the price they are actually willing to take. Housing prices usually are tied to employment, so if you’re in an area with high unemployment, you may be able to negotiate an even bigger dent in the asking price.
Linda Ray is an award-winning journalist with more than 20 years reporting experience. She's covered business for newspapers and magazines, including the "Greenville News," "Success Magazine" and "American City Business Journals." Ray holds a journalism degree and teaches writing, career development and an FDIC course called "Money Smart."