Buying A House
It's been said that Buying A House is the American Dream. This page is to help you avoid turning it into a nightmare. Know What To Look For The first step is understanding what you need. Your family (present and future) will determine what you should be looking for. There are also a set of emotional wants that surely exist. Take a good look into both the needs and the wants, with your head, not your heart.
There are 100 things to decide:- open plan or dedicated rooms? large kitchen? extra bedroom? large yard or small? How many cars go into the garage? how many bedrooms? need an office? You get the idea. When thinking about buying a house, you should make two lists - a wish list and a reality list. The reality list contains the items your family needs. This list is not negotiable. The wish list contains items that would be nice, but not necessary. Prioritize this list. Look for a home that has all of the reality list, and the top items on the wish list. Also consider which of the wish list items can be added to the house at a later date. Get a Mortgage Commitment BEFORE Shopping for a House Getting your mortgage pre-approved first is the best way to go about buying a house. This way you will know the maximum loan you will have available to you, and it lets the sellers know that you're a serious prospect. Get a commitment in writing. There are special incentive programs available to first time home buyers. Several of these offer reduced down payments. But be aware that if you finance more than 80% of the purchase price, you will incur a monthly PMI (mortgage insurance) charge. Here are two things you should do before getting your commitment: 1. Examine your current finances. Get a copy of your credit report. Look at your income and current household expenses (such as utilities and maintenance). Know how much more you can handle. Are you ready to be buying a house? 2. Understand the different types of mortgages available to you. Be conservative in your choice and stay with a fixed-rate option. If you need lower monthly payments, extend the term of the mortgage (30 years instead of 20).
Pick Your Location What are the 3 most important things to consider when buying a house - location, location, location. I guess you've heard that before. That's because the desirability of neighborhood, and resale of your future home, depend on location more than any other single factor. The value of your home is affected by the neighborhood and the other homes around it. Factors that impact the "value" of a community include the look and character of the town, quality of schools, access to work and transportation services, recreational facilities, entertainment, and so on. Every neighborhood has a unique character. You have to be comfortable in the one you're thinking about, so take a long walk (not ride) and observe everything you can. If the neighborhood passes muster, look at other homes on the market in the same area. You don't want the largest home on the block (it will appreciate slower than it's neighbors). If it's the smallest house, see that the yard allows for expansion. If not, this will limit the resale value. Don't go to the outskirts of the neighborhood. Too many factors beyond your control could have a detrimental affect on the home's future value. Buying a house in the middle of a community of similar homes will help hold its value. An exception to this is a home on the edge of open land - like a park, woods, a golf course or other open space. Natural boundaries appeal to most people and these homes could command a higher price. Just make sure there are no shopping malls planned for development of the open space in the future. Things that can have a negative affect on property values are: smells, noise, traffic, non-access to highways in bad weather.
Choose a Good Realtor Although the realtor typically will represent the seller, a good real estate agent will work hard, using the resources at his or her disposal, to make sure that your best interests are met. Simply, this is the best way to sell a home. They will also have a network of other professionals to recommend to you. These include lawyers, home inspectors, lenders, and movers - all the needed services when buying a house. When buying a house, make sure you communicate your list of needs and wants to the realtor. This will prevent lots of wasted time. Good realtors will probably ask you for this information first thing.
A good realtor will have a knowledge of the local housing inventory and will update that knowledge by touring homes as they are placed on the market. This works to your advantage when buying a house. The agent will narrow the field so you don't have to see every house with a general description that might work for you. When the time comes to make your selection, you can do it with the confidence that you have been well-informed about all the choices. Here's a tip - shop with your head, not your heart. It's an emotional process, but you can't allow yourself to want a particular home too much. That will cost you money. And show some interest about every home you visit. Point out something good about it. That way, when you see one you love, you won't be giving the agent the impression that this one is the one you will definitely buy - the only one you're interested in. This too will cost you money. Identify Acceptable and Unacceptable Problems Cosmetic issues can be easily fixed. These include peeling paint, worn carpeting, ugly wallpaper, overgrown and unruly bushes. These can be mentioned when negotiating your price, so make note of anything you see that can be useful. But if you take it too far and nit-pick, you might alienate the seller. This is not recommended. More serious problems might make you decide to walk away from buying a house. These could include cracks in the foundation, obvious water damage, signs of dry rot or termite damage. Although fixable, very old plumbing and/or electrical systems can be expensive. Any one of these can substantially add to the cost of buying a house. Hire a Professional Home Inspector A few hundred dollars for a professional home inspection will be the best money you spend while buying a house. The inspector brings an unbiased eye to the property, and his written report is an excellent negotiating tool. The typical inspection will look at: the foundation; the mechanical systems; floors, walls and ceilings; the roof; the attic (and the insulation); the siding, other exterior components like decks and porches; the garage; the septic system; and the way the property drains. If you go with the inspector around the property, you'll learn a lot about the house you intend to buy. Ask for a CMA (Comparative Market Analysis) in writing One way to ensure that you don't offer too much when buying a house is to ask your agent for a CMA. This will show you the sales (not asking) prices of similar homes in the neighborhood. It will also list asking prices of unsold homes. You may discover that the asking price is too high. Or you might even find another house that's a better choice for you. When making an offer, you can use the CMA as evidence to show the seller why you think your offer is reasonable. Use of Information While you're buying a house, information can be used for you, or against you. Information "for you" is information about the seller and his situation - why he wants to sell. Information "against you" is information about you. For example, a seller whose company has transferred him to another city will probably be more willing to sell at a lower price than someone who is still looking for a new home. Additionally, if the seller is involved in a divorce, they will probably sell at a lower price. Other signs of a motivated seller include a house that's been on the market for many months, has had more than one price reduction, or has been vacant for a while. Then there's the information you DON'T want to mention to anyone. How much you're willing to spend and your move-in deadlines can be used to negotiate against you. But tell the realtors everything they need to know in order to be effective on your behalf. They should know how much you have for a down payment and the size of the mortgage you can afford. However, you should keep your personal circumstances and time-line to yourself. One of the costliest mistakes you can make is letting the sellers know how much you like their house. Once you've let that horse out of the barn, you can forget about negotiating the price. No matter how great a house seems, no matter how much you want it, keep that to yourself. Leave your emotions in your car. Making An Offer Unfortunately, you will be making an offer BEFORE your bank has an appraisal done. This leaves the possibility that the appraisal will not justify the offering price. To make an offer that is reasonable and likely to be justified by the appraisal, work closely with the realtor to get information about recent comparable sales in the area (these are referred to as "comps"). In the event that the home appraises for a number below the price you agreed upon, you can go back to the sellers with an amended offer. But if they refuse, all you can do is walk away. Buying the house at the original offer really isn't an option. Your lender won't give you the mortgage you need - meaning you have to come up with more money yourself. Furthermore, you will spend the future knowing that you overpaid, and this will sour the feelings you had about the house. 
Negotiating
You may be the type that doesn't like to haggle. I fit into that group too. But when you're buying a house, negotiation is the only way to get a better deal than the one already presented to you. If you want to get the best home possible for the least amount of money, you should be prepared to negotiate. The seller probably has a deadline in mind. If you can learn what that is, it will help you negotiate a better deal. The inspection will undoubtedly come up with a few items that need repair (or soon will). Try to get the value of these repairs off the price. There might be times when the seller's agent will try to work two potential buyers so that they bid against each other - driving the price up. In these situations, whoever wins also loses because the buyer ends up overpaying. WALK AWAY FROM BIDDING WARS. Of course, there's the possibility that the agent is not being 100% truthful about the other offer. So just to cover that base, let the other side know that you might still be interested if the other deal falls through before you find something else.
The Hidden Costs The mortgage is not the only cost you will have to figure on having when buying a house. Don't forget to factor in mortgage insurance, appraisal fees, inspection fees, attorney fees, title insurance, and (in some states) a mortgage tax. There are also adjustments made at closing regarding the prorated share of real estate taxes already paid, and amount of heating fuel already delivered but not used. Buying a house is a complicated process. A good realtor will help you identify all the costs, and you should have your attorney get a list of closing costs a couple of weeks before the closing. This is called a "Good Faith Estimate". It comes from the lender, and will give you a chance to get your finances ready. For more on this subject, go to Home Buying Tips.
Here's a page about Getting A Mortgage. And this one tells you about Owning a Landmark Home. Here's a page about Real Estate Taxes. Here's a page about Using a Pre-Approval Letter to help you buy your dream house.
If you're planning a large renovation, get your hands on HOW TO CONTROL YOUR REMODELING PROJECT. You can learn more about it at this page.
If you want to discuss an issue with me, contact me about buying a house by clicking here.
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