Buying a Home: First Steps

Undoubtedly one of the biggest purchases many of us will ever make, buying a home requires a significant investment of time, research and, of course, money. Before you start picking out paint chips and drapes for your new house, take a moment consider some questions about why, when, if and how you plan to make your new home purchase.

Know your budget

The most basic guideline for budgeting how much you can spend on a home is to calculate 250% of your annual household income and use this as a rough guide. More useful, however, is to work with a person or a program that can take into account debts, expenses or assets that will affect your budget.

Think about loan options

It is standard to put down a minimum of 20% of the selling price as a down payment. If, however, you’re unable to put down this much, it is often possible to still get a loan. Look into public and private lending options that can offer mortgages requiring very small down payments. Just be careful to read the fine print and consider interest rates.

Think Schools

Even if your household won’t be sending any kids to school there, choosing a neighborhood in a good school district makes a home more attractive. You’ll likely be selling this home yourself one day, so remember that nearby good schools often increase the value of the homes in the area.

Time frame

Decide if buying is right for you by looking ahead a few years. Do you plan to stay in the same place for a while, or do you envision moving again within a year or two? If you don’t plan to make a commitment of at least two years, then it’s probably not the time to buy a home. It’s generally considered a poor financial decision regardless of the real estate market at the time.

Look carefully at your credit score

Review your credit history with a professional to make sure it’s correct and clean. Lenders will be carefully scrutinizing your credit report since you’ll likely be looking to get a mortgage from them to buy your home, so make sure you have your credit report clean and in order – you don’t want any surprises.

Ask the professionals

It’s not essential, but hiring a real estate professional who know the market, knows the ropes and has your interests at heart can save a lot of hassle and, potentially, money, especially if this is your first home-buying experience.

Do your research

You shouldn’t even consider bidding until you’ve done some research. Look at sales trends of recent home sales in the same neighborhood, talk to your real estate professional about realistic bids and consider what percent of the asking price these homes have actually sold for.

Hire a professional home inspector

Lenders will require that you get a home inspection from a professional of their choice, normally, but you should still hire your own inspector. Your lender is typically interested only in determining if the house is worth what you’ve agreed to pay for it. When you get a home inspection done yourself, you’ll discover any problems that might require expensive repairs or upgrades later on.

Decide if you need a real estate lawyer

This is mostly a matter of time, money and expertise. If this is your first home-buying experience, it is highly recommended that you hire a real estate attorney to help you with the logistics of bidding, closing, mortgages, value, etc. Usually the money saved by avoiding legal gaffs or traps outweighs the legal fees you pay your real estate professional. 

  • Written by: M Spatz
  • Monday, 23 January 2012