Are you Ready to Buy a Home?

It’s important to determine what you really want in a home before you even step outside to look at one. Having an idea of what you want will help you narrow your home search to homes that will fit your needs and wants. Simple decisions such as how much you want to spend and how big of a home you want can also save you time and ensure that you aren’t looking at homes that aren’t really what you want or need.

It’s is easy to get carried away with the home buying process and it can become more about comparing kitchen sizes and determining what landscaping changes you would make to the yard, than an important financial decision. People get wrapped up in what they like about a home and envision themselves living in it and walking through its hallways. They begin to forget or brush aside facts like the roof that leaked last year, a new furnace is going to be needed, and the yard is much smaller than they originally wanted.

When home buying it’s important to not get attached like this and to be able to step back and determine whether the house really is great or if you are straying far away from the qualities you originally thought were important in a home.

Price

Price is one of the most common factors that people tend to push to the limits. They look at how much more home or how much nicer of a home they can have if they spend a little more money. Lenders often assist in this process by offering large loans that really stretch their clients’ checkbooks. Before you stretch and stray from your original plans in this area make sure that you can really live with higher payments and a bigger loan.

Location

Location is very important. If you decide you want a home in the city, be wary of looking at homes out of the city that will increase your commute time, run up more vehicle expenses, and create annoyances such as not being able to order take out or not being able to make quick stops at home during the workday. If you don’t like to live in the city then by all means don’t place yourself in a city lot or apartment where you are going to feel crowded or annoyed by common city occurrences. You know where you will be most comfortable so don’t let realtor's or sellers try to convince you that the location of a home is great for you if it’s not really what you had in mind.

Size

You might have only wanted a 1500 sq ft house but yet your Realtor takes you to a 2500 sq ft house and tells you that it’s a good deal because its only $50 a sq ft. Soon you become hinged on the fact that this house is a really great deal and that maybe someday you’ll be able to make more off of selling it. Now, whoa, if you wanted a house with 1500 sq ft, are you going to be happy in a house that is 1000 sq ft bigger? If you buy a larger house, make sure you can live with higher utilities, taxes, and even expenses such as furniture to “fill” the home. Be sure that if you are going to buy a smaller house than you originally wanted that your family isn’t going to outgrow it soon.

Repairs

Many first time buyers, used to renting, forget about common maintenance work that must be done to maintain homes. Homes in good repair still require regular heating and cooling, roof, and yard maintenance, among other things. Keep this in mind when you set guidelines concerning what kinds of repairs you are willing to deal with yourself. If you are on a tight budget it’s a good idea to stay away from homes that will potentially cost you more in repairs than you can afford. If a house is a great deal but you have no extra cash to finish or fix it up, it may turn into a home buying nightmare. Also, if you are considering a fixer-upper, consider whether or not you really are the type. Do you like doing home repairs? Do you even know how to do home repairs? Often times it is not as cheap as people think to have a contractor come in and fix a home. Remember, once you buy a home, you get everything that comes with it, including repairs.

Practicality

If you ignore how practical a house is for your family you may end up with constant annoyances or problems on a daily basis. For example, if you have young children and decide that you want a single level house, don’t stray from your plans and buy a house with an elaborate staircase that can’t be blocked off and is a safety hazard. If you don’t like to swim or if you have young children, is the pool in the backyard really a bonus? Don’t let realtor's or sellers convince you that these “extras” are really what you need. In fact, if they can be labeled extras or bonuses and they weren’t in your original plan that’s all they really are, extra things to deal with.

You may stray from your original plans and expectations with the purchase of your home, which is fine as long as you keep a realistic outlook on the home purchase. You may find that the square footage you planned to buy would be way too small for your family or that the repairs you thought to be too tedious are really more common than anything. It’s simply important to buy a home that compliments your financial situation and personal lifestyle, rather than one that merely complicates them.

Before Looking for a Home

Buying a house can be a new and exciting process; it can also be very confusing and stressful. Becoming educated about the house buying process and being prepared can reduce a lot of this stress and confusion. Anyone buying a home should take the following steps before they even step out to look at a house.

Check your Credit History

The moment you decide that you are ready to buy a house is the moment you need to get a credit report. When pulling your credit report, be sure to use a service that provides you with copies of your credit history and score from all three credit bureaus: Experian, Equifax, and TransUnion. Not all credit information is reported to each bureau, and lenders do not all check the same credit bureaus to determine your credit score so it is important that you get a copy from each bureau.

Obtaining a credit report early on in the home buying process is important because if there are discrepancies on your reports you must write to the bureaus and request that they are corrected. Depending upon how busy the bureaus are, this process can take up to months. Fixing errors on your credit history can result in a higher credit score and improvements in your credit score may qualify you for a lower interest rate. A loan with even a .25% lower interest rate can save you thousands of dollars over the course of your loan.

It is also important to note that pulling your own credit report will not lower your credit score in any way, this only happens when companies, like banks pull your history in attempt to approve you for items such as loans and credit cards.

Research Potential Loan Programs and Lenders

A house loan is often the largest and longest term of a loan that many individuals will ever receive in their lifetimes. Therefore, time should be taken to review potential lenders and loan programs that you may qualify for. For example, if you have a not so perfect credit history or need a low down payment you might want to see if you qualify for a FHA loan. If you are a veteran you may qualify for a Veteran’s Administration loan, which among other things allows individuals to put no money down without having to pay Private Mortgage Insurance. Some lenders offer special rebates, promotions, and programs for home buyers that ease the expenses involved with buying a home. Individual lenders vary in the interest rate they charge and the fees involved in the loan process. Even the nonrefundable application fee for some banks is upwards to $500, so it is important to research a bank and become satisfied with the loan programs they offer before you apply.

Get Prequalified/Preapproved

There is a big difference between getting prequalified and preapproved for a loan. When you get prequalified for a loan there are generally no fees involved and the bank gives you a rough estimate as to what they would give you for a loan based on the information you’ve provided them. It is not completely accurate and many sellers will not accept offers from buyers who are only prequalified. When you get preapproved for a loan you will have to provide more documentation and pay an application fee. When you are preapproved the bank generally states that you are eligible for the exact amount of your preapproved amount, granted that all the information you have provided to them is accurate.

If you’ve decided that you are ready to buy a house one of the very first steps you should take is to get prequalified for a loan. Before going out to look at houses that may potentially be out of your price range, get prequalified for a loan so you know what houses you should be looking at. If after getting prequalified you find that you qualify for a lot less than you anticipated for, ask the lender what you could do to qualify for a larger loan. You may discover that your debt to income ratio is too high or that the length of your credit history is too short. You may then decide to reduce some of your debt or if you are satisfied with the amount you may decide to get preapproved for a loan.

Determine How Much you Can and Want to Spend

Now that you have checked your credit history, and have gotten prequalified or preapproved for a loan you must determine how much you can really afford to spend. Do not blindly assume that you will be able to afford the payments your lender says you can. Keep in mind that lenders often push the limits of your loan to the outer boundaries, in order to get you the biggest loan possible and to make more money. If the mortgage payment you qualify for is a lot more than your current mortgage or rent payments look at the new value realistically. Can you REALLY afford that payment? Can you live comfortably with that much less money per month? If you are used to renting, keep in mind that you will now be responsible for repairs, yard work, insurance, and taxes. Do not tell yourself that you will give up certain activities or change your lifestyle in order to afford your new payment.

House buying should be an exciting and stress free process. If you educate yourself about lending processes and take the steps above you will be more prepared than many other home buyers.

While Looking for a Home

(Common Home Buying Mistakes)

Home buying can be a tricky procedure as you are led through a process
that you often times know very little or even nothing about. It's easy
to be lured to spend too much and to fall in love with a house without
fully researching it. When I look back on my very first home buying
experience I see that it was no different. Here are some of the home
buying mistakes I made with the purchase of my first home...so here's
your chance to read about them instead of making them yourself!

Not Fully Inspecting the Home

After I moved into my first house I realized how little I had actually
inspected the house. I hired a home inspector to go through the house
but it was the minor things like cracks in the walls that were hidden
behind curtains, and plants growing in the gravel in the driveway that I
noticed later.

Be sure to actually go through the entire house and inspect everything
that your home inspector might not. Open all of the drawers, turn on
all of the lights, and inspect the yard for weeds or even animal
droppings. Look behind curtains and pictures for cracks and holes and
even under furniture for stains on the carpet. Look for anything that
might be bothersome to you or that you would be upset to find after you
moved in to the home.

Not Asking Questions

The time to ask questions about your house is during the home buying
process. After I bought my first home I realized that I didn't ask a
lot of the questions to which I wanted answers. Questions about the
decks surrounding my house and the septic tank went unanswered because I
never asked!

Before you close your deal ask as many questions about the house as you
can think of. Figure out how old all the appliances are, including the
water heater and furnace. Ask when the roof was last fixed or replaced
and how long ago the house was painted. Ask when the tile floors were
put in and if the hardwood floors are original. Ask anything that you
can think you might want or need to know someday.

Spending as Much as Possible

Spending as much money as possible on a house is probably one of the
most common house buying errors. When I purchased my first home I did
just that; I spent down to the dime the highest amount I could qualify
for a loan. And while I was used to having a rent payment which was
almost exactly the same as my new house payment I envied those with
smaller monthly payments.

Remember that the payments you choose are often the payments you'll be
faced with for years to come. If you know you'll have to change your
lifestyle or will struggle to make your payments, scale back and don't
rely on the expectation that you will get a raise or be able to sell the
home right away. Also, if you choose a variable rate mortgage be
prepared for your rate to vary...which means up and down, and even up,
up, up!

Not Researching Neighborhoods

Perhaps the worst error I made with my first home purchase was my
failure to research the neighborhood. Had I gone through information
about the neighborhood I would have discovered that the water company
that provided water to the neighborhood was unreliable and residents
often had water outages and low water pressure. Lesson learned.

Research the neighborhoods of the homes you browse. Look up crime,
utility, industrial, and environmental factors. Search newspapers for
articles about happenings in the region. Drive through the
neighborhoods during different time of the day. Remember, while a
disclosure often provides buyers with information about potential
utility or neighborhood problems, don't count on it. Always do your own
research!

Not Talking with Neighbors

My water woes would have been brought to my attention had I simply went
and talked to some of the surrounding neighbors. After I bought my
house I discovered that my new neighbors were all very friendly and said
they wished I had asked them about the problems because they would have
been glad to talk to me about it. Once again, lesson learned.

Make it a habit to talk to the neighbors of the homes you are
considering buying. In most cases they will be interested in who might
buy the home and will be happy to talk to you about the neighborhood or
even the previous residents. You might be glad to talk to them after
finding out they think the house was used to run drugs or you might be
ecstatic to find out that the previous owners meticulously cared for
their home.

Lessons Learned

If you've made any of the same mistakes I did or different ones remember
that mistakes provide us with more knowledge and the ability to make
better decisions in the future. So accept your house buying blunders
and move on with your newfound knowledge!