Buying a home seems like a huge mountain to climb, requiring years of preparation. While it’s true that it’s not exactly an impulse purchase, it doesn’t need to be mysterious or scary.
Much of the preparation needed is simply planning for the future. Of course, future planning can absolutely be a source of anxiety. Buying a home is a big commitment!
That’s exactly why Covered is here to help. Since this is probably the biggest purchase of your life, we’ve sorted through a mountain of suggestions to uncover a clear path leading to your new home. By asking and answering the questions below, you can be well on your way to a sound investment that makes sense for your life.
Let’s Talk Money
First, let’s get the money question out of the way. The least fun part of buying a home may be deciding what you can afford, because it bundles in a bunch of other questions. Will you really live there forever? Are you willing to fix up the house? What does your budget allow? And that’s when you realize, “Wait, I’m supposed to have a budget?”
Yes, banks will only give you so much money. So it’s best to have a realistic number in mind. A few things to consider as you decide on your number:
- How much do you need to account for in fees? Because those fees do add up. Taxes and insurance, lender fees, and other closing costs can all add up to sticker shock. Ask your agent how much this will add to the home’s actual selling price.
- Do you have enough savings for a down payment? Savings help! Like eating your greens, you’re supposed to do this — but few do. Be aware that not having up to 20% of the home’s price could mean you have to tack on mortgage insurance.
- What’s your debt-to-income ratio? This ratio factors into your mortgage rate. Borrowing too much at a time can spell disaster if you lose your job or face other unexpected costs. Calculate yours before making a decision.
In combination, answering these questions will mean you should have a realistic expectation of being able to afford your home. So make sure to tally up the actual costs before dreamily sifting through neighborhoods and architecture styles.
Finally, can you get pre-approved for a loan? Getting pre-approved for a loan also means you can pounce on that dream home when you find it. Then, the fun stuff can really begin!
Location, Location, Location
Then there’s the where and what of home buying. Where do you want to live? What type of home do you want? And how long do you want to live there?
Considering how long you want to live somewhere will factor into what type of mortgage you get and what type of home you want. Some people plan to move within a few years and just need a starter home. Some go further, buying a house that needs work and “flipping it” to fund a move into a bigger house they prefer.
Nowadays, Americans aren’t moving for jobs that often. That means there’s a good portion of the country that’s focused on putting down roots. If you’re putting down roots, it can make a difference in where you choose to live. For example, considering which school system or other amenities are nearby can become a detective movie in real life. Of course, you can use the internet to do research on school zones, construction zones (are new developments going up?), or mixed-use zones like downtown spaces.
Whatever your considerations, the best course is to keep an open mind — but narrow down your locations to a handful. No one wants to look at 40 houses, so focus on three or four ideal properties and start shopping around.
Also, ask yourself: What are your deal breakers? You should come prepared with a short list (seriously, short) of deal breakers. This will help you sift and sort your results before scheduling walkthroughs, thereby saving yourself from future heartache. For example, maybe you don’t want to drive to work, so you need to be near a train or bus line.
Only Fools Rush In
Once you find a house you really like, it’s time to make an offer and get a home inspection. Both items tend to be things new home buyers may want to rush through — you want to get in that house already! — but it’s important to answer a few questions first. Specifically:
- How motivated is the seller? If they’re moving or no longer live there, you may be able to lower your offer. They may be ready to have it off their hands.
- How long has the property been on the market? This fact, and nearby home prices (also known as “comps”), can help you determine if the asking price is aligned with reality.
- Will the seller cover any needed repairs? Repairs may be needed after your home inspection. This can become a point of negotiation, and a good inspector may uncover problems that could cost you significant money down the road. You shouldn’t be afraid to walk away if you aren’t prepared to deal with the cost, time, or hassle of needed repairs.
Finally, there’s insurance. A lot of home buyers may gloss over this part, because homeowners insurance is usually paid for out of an escrow account. But escrow can be a major cost over the life of the mortgage. That’s why it’s a good idea to ask the right questions here, too: Are you getting a good rate? And are you getting the coverage you need? You didn’t work this hard and get this far to have insurance be a stumbling block, that’s for sure.
And that’s why we built Covered. We make it easy to shop around for just the right homeowners insurance, taking the mystery out of the process. Check out just how easy it is.