Tips for buying a house
The top 10 things you need to know when buying a home.
| Originally published on money.cnn.com |
|
1. Don't buy if you can't stay put.
If you can't
commit to remaining in one place for at least a year, then owning
is probably not for you, at least not yet. With the transaction costs of
buying and selling a home, you may end up losing money if you sell any
sooner - even in a rising market. When prices are falling, it's an even
worse proposition.
2. Start by shoring up your credit.
Since
you most likely will need to get a mortgage to buy a house, you must
make sure your credit history is as clean as possible. A few months
before you start house hunting, get copies of your credit report. Make
sure the facts are correct, and fix any problems you discover.
3. Aim for a home you can really afford.
The
rule of thumb is that you can buy housing that runs about
two-and-one-half times your annual salary. But you'll do better to use
one of many calculators available online to get a better handle on how
your income, debts, and expenses affect what you can afford.
4. If you can't put down the usual 20 percent, you may still qualify for a loan.
There
are a variety of public and private lenders who, if you qualify, offer
low-interest mortgages that require a small down payment.
5. Buy in a district with good schools.
In
most areas, this advice applies even if you don't have school-age
children. Reason: When it comes time to sell, you'll learn that strong
school districts are a top priority for many home buyers, thus helping
to boost property values.
6. Get professional help.
Even
though the Internet gives buyers unprecedented access to home listings,
most new buyers (and many more experienced ones) are better off using a
professional agent. Look for an exclusive buyer agent, if possible, who
will have your interests at heart and can help you with strategies
during the bidding process.
7. Choose carefully between points and rate.
When
picking a mortgage, you usually have the option of paying additional
points -- a portion of the interest that you pay at closing -- in
exchange for a lower interest rate. If you stay in the house for a long
time -- say three to five years or more -- it's usually a better deal to
take the points. The lower interest rate will save you more in the long
run.
8. Before house hunting, get pre-approved.
Getting
pre-approved will you save yourself the grief of looking at houses you
can't afford and put you in a better position to make a serious offer
when you do find the right house. Not to be confused with
pre-qualification, which is based on a cursory review of your finances,
pre-approval from a lender is based on your actual income, debt and
credit history.
9. Do your homework before bidding.
Your
opening bid should be based on the sales trend of similar homes in the
neighborhood. So before making it, consider sales of similar homes in
the last three months. If homes have recently sold at 5 percent less
than the asking price, you should make a bid that's about eight to 10
percent lower than what the seller is asking.
10. Hire a home inspector.
Sure,
your lender will require a home appraisal anyway. But that's just the
bank's way of determining whether the house is worth the price you've
agreed to pay. Separately, you should hire your own home inspector,
preferably an engineer with experience in doing home surveys in the area
where you are buying. His or her job will be to point out potential
problems that could require costly repairs down the road.
