Buying a home is an exciting time in someone’s life. When you think you’re ready to buy a home, there are a handful of things to keep in mind before making such a large financial investment, as well as a serious commitment. Not only do you need to know what kind of budget you’re working with, but you should also plan for the future, not just the next year or two. Let’s take a closer look at 10 of the most important things to know before you purchase a home.
Always Use a Licensed Inspector
One of the most important things to keep in mind when you’re looking for a new home is that sellers aren’t always going to be honest. If a home looks safe and there aren’t any obvious concerns, it can be tempting to pass on the cost of an inspection and just go for it, but this is where things can become problematic.
Sure, an inspection from a licensed inspector will likely cost you several hundred dollars, but it can save you a ton of trouble if there are any issues. You can request that the seller remedy the problem, or you can back out before you’re left with something not worth the hassle of repairing.
Be Prepared For Hidden Costs
When you see a home for sale in your price range, it’s easy to think that you will be able to afford the house, but that’s not always the case. The purchase price of a home is just the beginning. In addition to your monthly mortgage cost, you will also need to consider the cost of your homeowners’ insurance from insurance companies in Cincinnati, closing costs, taxes, and you may find that you have higher utility costs if you’re moving into a larger home. Other costs can include HOA fees, furnishings, and moving costs.
Home Improvements Aren’t Always Budget Friendly
The appeal of buying a fixer-upper is that you can get a home with a lower price tag that needs a bit of love and updates throughout the house, transforming it into your dream home. There are some improvements you can make that won’t break the bank, such as a fresh coat of paint or a new backsplash in the kitchen, but what many people don’t consider is that many remodeling projects are complicated and expensive, especially if it’s a project that is out of your skillset. You may need to hire help to complete the job.
Plan For The Future
For many people, renting is the norm. Most people consider that a win if you find an affordable rental that will work for a few years. When you commit to buying a home, it’s important to look beyond the next 1-3 years of your life and choose something that will grow with you. Think about who will be living in the home immediately and how you see your life-changing over the next 5-10 years. If you may end up in a long-term relationship or adding more pets or children to your family, be sure to think realistically about the amount of space you will need.
Home Warranties
When you own a home, you no longer have the option to contact your landlord if your stove or furnace stops working. Some people choose to purchase a home warranty, which covers several repairs that can be hard to pay for out of pocket. If one of your major home appliances or systems stops working, your warranty may cover repairs, service, or replacement, potentially saving you thousands of dollars.
Know Your Budget
While the main portion of your monthly living expenses will be the mortgage cost itself, that is not the budget that you truly have to work with. Most new homeowners aren’t paying cash for their home; they work with a lender and are financed.
When setting your monthly budget, you should consider the cost of the monthly mortgage payment, plus interest, property taxes, mortgage insurance, and homeowners insurance. The easiest way to do this is by using a simple online mortgage calculator, you just plug in the rate and term info, and you’ll be able to estimate an affordable monthly payment.
Loan Programs For First Time Home Buyers
In most situations, homebuyers are expected to have a down payment of up to 25% before purchasing a home, but many loan programs allow a first-time buyer to make a down payment between 3% and 5%. Many buyers decide to invest in a duplex to live in one unit and rent out the other, allowing them to essentially live mortgage-free.
Adding Value
If you intend on living in your house for years to come, consider making improvements along the way. Renovations and appliance upgrades make the house more enjoyable for you to live in, but they can also increase the value of the home if you ever decide to sell. Sure, the renovations can be expensive, but when you think about building your equity, renovations are a great way to do it.
Maintenance Costs
Many individuals can live in a home for several years without their appliances malfunctioning or breaking, but this is not the most common situation. For most homeowners, appliances or systems in the home will need to be serviced, repaired, or replaced at some point. Most experts advise homeowners to budget 1% of the value of a home each year for maintenance and repairs. So if your home is worth $200,000, you should plan for $2,000 annually to be on the safe side.
Make Sure Your Finances Are In Order
Your finances, debt, and credit are going to be gone through with a fine-toothed comb before your lender eventually approves or denies your final mortgage application. Before you start, make sure your finances are in good shape, clean up your credit report, and optimize your debt-to-income ratio. Make sure that after you clean up your credit and get your pre-approval, you don’t accrue any other debt or miss any payments before getting your mortgage issued.
What You Need To Know Before Buying A Home
Buying a home is one of the most important purchases of your life. Whether you’re preparing to buy your first home or your fifth, knowing as much as you can beforehand gives you a huge advantage. By using these tips, you empower yourself to make your process of buying a home smooth and in your favor.
