Written by Guest | October 31st, 2019Our goal here at BestCompany.com is to provide you with the honest, reliable information you need to find companies you can trust.
Guest Post by Dan Matthews
Buying a home is a life-changing decision. In addition to the financial implications, purchasing a home may mean a change in where you live, the schools your children attend, and the local friends that your family may make. With so many potential changes, you’ll want to make sure that buying a home is the right decision. Below are some of the most important details you’ll need to consider when buying a new home.
Determine what you can afford
First, start by determining if you can afford to buy a house. Plan to put down 20 percent of the price of the home as a down payment, though government-issued home loans may allow you to put down less. To get a mortgage, you’ll also need steady employment for the past two years, and you’ll need a good credit score. The Federal Reserve reports that during the first quarter of 2019, 90 percent of people who qualified for a mortgage had credit scores of at least 650. Only 10 percent of those who qualified for a mortgage had credit scores under 647. If your credit score is low, you may want to consult with a credit repair agency or financial counselor to bring that score up before you apply for a mortgage.
To increase your chances of being approved for a mortgage, you should consider how much personal debt you have. While you can be approved for a mortgage with existing personal debt, that debt does need to be below a certain percentage of your income. In most cases, you can be approved for a mortgage that uses up to 28 percent of your income. If you have both a mortgage and personal debt, the two will need to total 36 percent or less of your income. Before you apply for a mortgage, lowering your personal debt or avoiding taking out additional debt can improve your chances of being approved.
You may qualify for a large mortgage, but there are many reasons to buy less house than you can afford. When you buy a house that’s priced less than the maximum mortgage that you can afford, you’ll be able to save some of the money you would have put into mortgage payments. Chances are that you’ll find plenty of ways to use this money, whether it’s to finance home repairs and upgrades or to set the money aside in your emergency fund. When you aren’t maxing out your income to cover your mortgage, you’ll be better able to deal with unexpected expenses in any element of your life. This means that you’ll probably be less stressed and able to focus on enjoying your home instead of focusing on finances all the time.
Set a renovation budget
Homes in need of renovation often bring lower prices, but renovating takes both time and money and can add stress to the experience of buying a home. If you are buying a fixer-upper, bring an experienced contractor with you to view the house so you can get an idea of potential renovation costs. Always budget extra for renovations, since you’re likely to discover unexpected problems like plumbing or electrical wiring that needs to be replaced.
Decide ahead of time how much renovation you’re willing to take on, and whether you’ll be contracting it out or doing it yourself. Even if a home doesn’t need significant renovation, you’ll probably want to make some changes like upgrading appliances, installing new flooring, and removing old wallpaper. These smaller changes still take time and money, so draw up a budget so that you know just what you’ll be getting into.
Consider the neighborhood and location
One important item to add to your house-hunting checklist is research about the neighborhood and the location. If you have or are planning to have kids, you’ll need to research the school districts and schools of each house you are considering. Other factors, like the commuting distance to your job or the availability of local grocery stores, are also important elements to consider.
If you’re considering a home that is in a neighborhood with a homeowner’s association (HOA), you’ll need to weigh the benefits and disadvantages of HOAs. Research the particular HOA and try to talk with some neighbors to get a sense of how the HOA operates. You may also be able to get a copy of the HOA’s rules for homeowners, which will help you to better understand the rules you will need to follow if you move in.
If you are looking at a house in a planned community, check out your local record’s office to see the covenants, conditions, and restrictions (CC&Rs) for that neighborhood. Some CC&Rs prohibit rentals, certain pets, or even home-based businesses. Knowing the expectations before you sign on the dotted line might save considerable headaches in the future.
Prepare with a detailed inspection
Homes can contain hidden issues, like asbestos in the walls, that are very expensive to fix. If you plan to renovate a home and discover it contains asbestos, you’ll need to create a remediation plan and bring in professionals to fix the issue. That’s one reason why investing in a home inspection is so important. Hire a trusted inspector who comes highly recommended to look for these issues that you might otherwise miss.
Once you have your inspection report back, you’ll need to decide whether these issues are problems that you can fix on your own, whether you want the seller to fix the problems before you move in, or whether the problems are so significant that you need to walk away from the house and find another property. If you’ve already weighed the other details, like the cost of renovating a home and the perks of its location, you’ll be better prepared to decide if this home is still right for you.
Dan Matthews is a writer with a degree in English from Boise State University. He has extensive experience writing online at the intersection of business, finance, marketing, and culture. You can find him on Twitter and LinkedIn.