Owning a home has many benefits, but it is not something to be taken lightly. There are countless things to consider before buying a home. Here are Tradewind Investments we want our tenants and customers to enter into their new home with confidence! So before you take the plunge ask yourself these questions and decide if you’re ready to buy.
If you decide that renting is a better option for you, check out our rentals page to see what we have available!
Before you waste time looking at homes, condos and town homes to buy, start here. There are a few things that need to be considered before buying a home.
-If you have debt from student loans, credit cards or car payments you will want to pay these off as much as possible before getting a mortgage payment on top of everything else.
-Check your credit score, if you have a low credit score work to repair this before you buy a home.
-How much do you have saved? If this number is significantly less than a down payment for a home or exactly the amount of a down payment, save up before buying a home. If any of these points apply to you, weigh your options; it may be best to wait till you have a better financial situation to buy a home.
Whose names will go on the deed?
Decide who will be on the deed before you begin your search for the perfect home. Mortgage representatives will only look at the income of the person or persons on the deed when they are looking at how much to pre-approve a buyer for. This can be an emotional conversation so approach it with care and sensitivity.
Where do you see myself in five years?
How many times have you been asked this? Countless times I’m sure! But, when was the last time you asked yourself? Ask yourself about what the future holds for you, if you want to be at the same company, if you want to grow your family, if you want to get married. If you see a lot of changes in the not so distant future that could affect your living situation consider making more permanent roots before purchasing a home, because once you buy a home you can’t ditch the property at the end of your lease, because there isn’t one.
How long do I plan to live in the home?
Buying a home is a long-term commitment, the minimum commitment you should make when buying a home is five to seven years. Look at your housing situation with a long lens, look in to the future and consider that real estate can be volatile and if your life is bound to change in the near future that it may be better to wait.
Am I mentally ready to be a homeowner?
So maybe you are financially ready, you paid off your credit cards and your student loans, you have great credit and you have plenty in your savings. But is your heart ready to make that commitment? Owning a home is a long-term commitment that can’t be taken lightly. Even if your finances are ready if you are unsure about where you want to be in the next few years or if you could see yourself moving to a new city for work don’t make the plunge, wait until you are ready.
Suburb or City?
Location, location, location! Consider the pros and cons of both the suburbs and the city and decide where you can bend and where you cannot.
Do you want to commute to work?
Do you want to pay more money for a smaller space?
Do you want to have kids?
These are all questions to ask yourself when you are looking at new homes!
What do I intend to do with the property?
Well usually the answer would be to live in it, right? But, do you intend to fix it up and rent it out for secondary income? Do you intend to start a family here or is this a place where you and your spouse will grow old together? Each of these different uses come with different considerations.
If you want a fixer-upper, are you willing to put in the hours and cost to make it an ideal home?
If you want to rent it out for secondary incomes are you prepared to have the responsibilities of being a landlord?
If you want to grow a family, how many rooms will you need? Do you want a big back yard? Is this the safest place for a family? What is the school district like in this area?
If you plan to grow old in your new home, consider getting a single story home and think about the needs you will have as you age.
What are my absolute must haves in a home?
No home will be 100% perfect the moment you sign the deed. Before you even start looking at homes, consider the features you cannot live without, number of bedrooms, proximity to good schools for the kids? When you have an idea of what you need it can help narrow your search to find exactly what you want.
What features are on my wish list?
Making a list of things you want but can be flexible on may be one of the deciding factors between one location and another. Examples of this are a large kitchen space because you love cooking, a porch for bbqs and parties, or a backyard for the dogs.
Credit and Finances:
How flexible is the seller on the asking price?
Ask the seller how flexible the owner is on the price; this will give you an idea of what kind of offer to make or if the seller is willing to bargain. Another question to consider asking is, if the seller is willing to help with closing costs. Avoid asking how much less the seller will take.
Have I factored in closing costs into budget?
The fees do not stop after the down payment. Closing costs are miscellaneous fees on top of the down payment on the house. This can include payment for processing the loan, fees toward the title company for handling paperwork, fees for the land surveyor, fees toward the local government office for recording the deed, etc.
Will the lender allow a short sale?
A short sale is when the bank allows the property to be sold for less than the amount of the outstanding mortgage. But, if the seller’s bank doesn’t give its consent, the short sale can’t happen. On occasion the seller decides to list their properties as “short sales” before talking with lenders. Realize that this may be a misunderstanding because your financial situation might not meet the lender’s criteria for short sales. So even if you and seller settle on a price, without the bank’s permission there won’t be a deal. Do a little investigation about short sale homes. Find out if the buyer has gotten permission for a short sale, what was the bank’s reason for granting it, does that reason sound plausible (divorce, job loss, transfer)?
How do your finances look? Be honest.
Consider if you have a consistent income or not. It’s preferable to know what will be coming in every month so you know if you will have the ability to pay your mortgage every month. Banks prefer to lend to people who have a stable job, preferable two years at the same company. It’s expected that people will have a small amount of debt, but too much debt is a red flag. If you have student loans, car payments and multiple card balances you may want to consider getting rid of debt before buying a home. When banks give you a mortgage they expect you to pay it back, if they see that you can’t pay off smaller loans, it’s unlikely that they will take a chance on you.
Can you make the down payment?
The ideal situation would be that you could put down 20% of the purchasing price. But, make sure you have money left over to pay for inspections and closing costs. The down payment is essential so be prepared.
How much are you comfortable paying every month?
Consider what you can spend every month. Make a budget for yourself and decide what you are willing to pay, stick to this number to be successful in maintaining your mortgage payments. If you are looking to spend more monthly than your current budget consider the little luxuries that you may need to sacrifice such as vacations, recreational activities, buying new gadgets, etc.
Am I making good progress on my savings?
So you have enough saved for your down payment, closing cost, inspections, moving men and everything else that comes with buying a new home but will you have anything left after those initial costs? Your emergency fund is important when considering buying a home. You need to save money to prepare for the worst. If you lose your job, if you get in a car accident, if you have unexpected hospital bills or home repairs. You need to be prepared for this because you need to have the ability to pay your mortgage even when times are rough.
Have I accounted for all the costs of a home?
Yes you have a monthly mortgage, but what else do you have to pay when you own a home? Taxes, insurance, utilities, repairs, lawn care and pest control. Are you prepared to pay for these costs on top of your mortgage?
What are the monthly utility costs?
Receiving an average utility cost from the previous owner is essential to understanding your budget. Get to know what the house uses, does it use gas, electric, propane or a combination. Once you know this information you can look at your budget and see if it’s feasible or if you should look in to energy-efficient appliances to save money.
Is my job secure?
Maybe you got a sweet new gig with a pay increase, but that doesn’t necessarily mean long-term security. Consider how long you have been with your current employer, what your prospects are at this company and what the future of the company could be. Heaven forbid you lose your job, would you be able to pay your mortgage? How long would you be able to pay your mortgage if it took you some time to find a new job? If your job may require relocation, or if you have multiple dependents these are all considerations that need to be made before purchasing.
Improvements and maintenance:
What’s wrong with this house?
Don’t assume that the house you are looking to buy is in perfect condition. Be sure to question this when viewing houses, ask what is wrong with the house. You would hate to find out about issues with the house during inspections and disclosures, so get the truth out early so you don’t waste your time and the time of the seller.
How much maintenance can I handle?
There are fun aspects to owning your own home, but with great opportunity comes great responsibility. It may seem like a good idea initially to buy a fixer-upper but are you willing to pay for the cost of repairs or spend the time and money making those repairs yourself? Consider the fact that bigger homes will have higher utilities, homes with large backyards require a lot of water and maintenance. If the idea of weekend projects, dealing with maintenance, mowing and maintaining a lawn and paying to heat a large home you may want to consider a town house or condo.
Can I make additions or renovations?
If you are looking in to buying a home that you want to make renovations or additions to do your homework. If the property is in a historic district or a preservation area there may be regulations about additions and renovations. Some homeowner’s associations, local, state and federal government regulations may also prohibit some changes. So before buying a home you want to update, make sure those changes are allowed.
Has there ever been a busted pipe?
Broken pipes are not as rare as you might think and they cause a lot of homeowners to make water damage repairs, the previous owner should disclose any damages and a good inspector should be able to see if water damage has occurred. This is not something to take lightly, according to the Insurance Information Institute 22% of all home insurance losses is because of frozen or burst pipes.
How old is the roof?
Replacing a roof is not a small task, especially for your wallet. Knowing the approximate age of the roof of the home you are looking to buy will help you know when this needs to be replaced, once you know how soon this needs to be done you can begin to budget for it. Asphalt shingles need to be replaced every 15 to 20 years, metal roofs need to be replaced every 30 to 45 years, concrete tiles every 35 to 50 years and wood shakes every 20 to 50 years.
Have there been any infestations of termites, carpenter ants or other pests?
Often when infestations occur the pests aren’t complete eliminated, of the condition of the house made it prime for pests. If the house has a slow leak, soft rotting wood or if the neighborhood has had pests in the past your future home may be prone to these pests again in the future. Do some research about the house and the neighborhood because termite extermination can cost over $1,500.
Has the sewer ever backed up?
Most homeowner’s insurance policies don’t cover damage from backed-up sewers and it’s a mess. As the property ages and the plants and trees grow the property becomes more vulnerable to sewer back ups. If the property you are looking at is prone to back ups consider the cost and the mess that may occur. Sewer line cleaning should be performed every other year at an average cost of $150.
Is there documentation on warranties for appliances? How old are they? Will they need to be replaced?
If the previous owner has any records, warranties or manuals from appliances be sure to snag them. Check out the purchase date on major appliances and see if they will need to be replaced, if they are close to needing an upgrade consider this as you budget for your new home.
How big is the water heater?
If you have a large household and want to avoid conflict consider the size of the water heater. There is a higher demand and a larger gallon capacity requirement needed for larger households.
When was the last time the septic tank was pumped?
Pumping a septic tank is $200 to $300, if it’s been a few years since it’s been pumped factor this in to your budget. The U.S. Environmental Protection Association suggests that this should be pumped every three to five years.
Will my car, truck, van or SUV fit in the garage?
Do you have a large truck or SUV? Is your car fitted with a roof rack or another accessory that makes it especially large? It’s more common than you think that larger newer vehicles are too large for older garages. If you want your truck or SUV to be parked cozy in your garage make sure it can accommodate it.
Kids and Family:
Is the neighborhood safe?
This is always an important thing to consider when you are looking for a new home or apartment but especially important when you have little ones. Here are a few websites you can reference to find out what the crime is like in the neighborhoods you are looking to live in:
Keep up on local news, research your city, enforce curfews, install a security system and improve lighting around your home to ensure your family members are safe, no matter how safe the neighborhood you live in is.
What are the schools like in the area?
If you have children we are sure that their education and future is the most important to you. While considering neighborhoods to live in you can check out greatschools.org to get ratings, reviews and a parent community to help you decide the best school for your children to attend. Another great resource is http://www.education.com/schoolfinder/ this can help you to know where your children will be going to school and provide information to you to help you decide where you want to send your children, for example public or private school.
Check out our sources below for more information: