7 Steps to Take Before Buying a Home
Buying a home is a huge milestone in life, and the desire to rush towards milestones is natural; especially when that milestone is a quaint, two-story Victorian with a white picket fence—and we think we have it in our sights. Still, the home buying process is more obstacle course than race. Navigating the process successfully requires foresight.
Here are seven ways to prepare for buying a home:
Decide what you can afford
Buying a home at the top of your budget is a rookie mistake. Remember that you are going to be saddled with a monthly mortgage payment for years. Try to consider the other expenses you will need to cover while making that monthly payment. Some of these you are already familiar with: food, auto insurance, electricity, etc. Others will become part of your life as a homeowner: home insurance, homeowner association fees, and property taxes. Generally, you should try to make sure that your mortgage payments are no more than 28% of your salary.
Study up on loan programs
When it comes to taking out a loan, you have hundreds of choices, some of which are more affordable than others. Your state and federal government might offer programs to reduce the cost of home ownership, provided you meet the eligibility requirements. You can learn more about these at www.hud.gov.
Understand neighborhoods
Two people within the same city can have vastly different living experiences based on their neighborhoods. Consider your lifestyle when choosing a neighborhood. If you have children or plan on having children soon, you should look at the ratings of nearby schools. If you’re an old soul who craves quiet and the ability to walk to brunch, you might look into historic districts.
Learn to negotiate
The home buying process is gnarled with negotiation. Reading up on how the home buying process works and talking to friends and family about their experiences can help you give the confidence to bargain and negotiate. Don’t be intimidated. At its heart, negotiation is just another form of human interaction. The same rules apply. The more you can relate to the other party (understand where they are coming from) and communicate your position, the more successful you will be.
Budget for furniture and décor
If you’ve lived in rental homes before, it’s likely that you already have you basic furniture needs covered. However, upgrading to your own home often inspires the desire to upgrade your furniture. Even if you are sentimentally attached to your old college beanbag and the mattress you inherited from your parents, which is older than you, you are likely to have a lot of empty space because rental spaces are often smaller than your first home. Real estate professionals estimate that, on average, new homeowners spend 25% of the value of their new home on furnishing and decorating the home. Be prepared!
Educate yourself about home insurance and home warranty
Home insurance is a must. The devastation that can be caused by a natural disaster destroying your home is severe enough without experiencing a lack of funds to replace your home. However, some insurance policies may be more practical for you than others. If you live on the gulf coast, insurance for hurricanes is indispensable, but if you live in a small town in Kansas, you probably don’t need that expense.
In addition to insurance, new homeowners can opt for a home warranty, which covers the possibility of a break down in home systems like plumbing and AVC.
Know how long you intend to stay
Unless you will be living in your house for five years or more, you will probably not have enough equity built up to compensate for expenses like closing fees and home inspection fees when you decide to move again.
Just as a marathon runner takes a quick stop to stretch and re-hydrate before the last leg of the journey, you should take steps to prepare yourself before embarking on buying a home. Doing so gives you a greater chance to succeed as a homebuyer and, more importantly, as a homeowner.