Things to Consider When Buying a House

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Prospective homeowners have a lot to think about when searching for a place to live. Buying a house is a major financial transaction and something that you should avoid rushing into at all costs.

This article explores why you should buy a house and the key considerations you should keep in mind during the process. 

Key Considerations for Home Buyers

  1. Financial stability
  2. Lifestyle
  3. Space
  4. Realtor quality
  5. Property potential
  6. Local area
  7. Environmental outlook
  8. Connectivity
  9. Rates
  10. Closing costs
  11. Friends and family

1. Financial stability

When it comes to homeownership, affordability is the name of the game. If the purchase price of your home is more than you can afford and you move forward with the transaction, it can be one of the worst financial decisions you ever make. 

To avoid that fate, conduct a financial gut check, make sure you’re in a solid place to purchase a home, and pinpoint a price range that works for you. To determine that, consider your job security and income level, savings, debt load, and spending habits. 

If you’re just starting out in your career, you might want to consider holding off buying a house until you’re absolutely certain in your profession. 

On one hand, buying a house when you’re just starting out in life can be a grounding and stabilizing factor. On the other hand, it can prematurely tie you to a particular area, put you into serious debt, and burn a hole in your wallet. 

Granted, the job market is now largely remote. So, geography may not apply quite as much to the home-buying process as it used to. However, it’s still an important consideration. 

In short, make sure you have the ability and desire to support a house before you move forward with the process. The last thing you want to do is purchase a property only to wish you were somewhere else. 

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2. Lifestyle

It’s also important to think about the lifestyle that you want to have in your new house. 

For example, if you’re the type who walks around with a measuring tape tied to your belt, and you know everyone at your local hardware store by name, then you may be happy with a fixer-upper that you can grab below market value. 

If you’re the type of person who would rather spend Saturdays making money, spending time with friends and family, or playing video games and relaxing, you may opt for a newer home or a condo that comes with less maintenance and hassle.

Bottom line? Think about the type of lifestyle you want to live and factor that into your decision.

3. Space 

Part of picking the right lifestyle involves determining how much space you’ll need to be happy. 

If you have pets and a growing family, then you’re most likely going to need more space. 

It was recently revealed that football star Rob Gronkowski’s childhood home was an extra-large, double-width house that was custom-built to support five gigantic growing boys (four of whom went on to play in the NFL). While you may not be raising five children, this anecdote is a good lesson about the value of space. If you buy a house that’s too small, you may have to upsize sooner rather than later. 

At the same time, if you’re a single person or you and your significant other don’t intend on having pets or kids, you may want to stick with a smaller house. Doing so can save you money and reduce the amount of upkeep. 

At the end of the day, you need to remember that you don’t need to buy a giant house to be happy. Instead, buy a place that aligns with your needs. You’ll be better off for it in the long run.

4. Realtor quality

The real estate agent that you hire is integral to your success. This individual is going to be responsible for many different aspects of the process — from discovering properties and arranging walkthroughs to negotiating offers and recommending a home inspector. 

As such, it’s vital to vet each agent thoroughly. Make sure they are sharp and highly knowledgeable about real estate and the local market where you’re looking to buy. 

To do this, have a formal sit down with the agent before you agree to work with them and put together a list of questions. Get a sense of who they are and how they operate. You should also look for online reviews and a demonstrated history of success in closing deals. 

Whatever you do, don’t sign an exclusive agreement with a real estate agent until you’re entirely certain that the individual is the right person for the job. The last thing you want is to get locked into a contract with someone you’re unsure about.

5. Property potential

It’s important to have an open mind when driving around and looking at properties. Don’t look at a house in its current condition. Visualize what it could realistically look like once you are in control of it. 

For example, don’t just look at a kitchen as it is. Imagine knocking down a wall, opening up the space, and replacing the countertops. All of a sudden, your entire perception of the space changes, and you think about what could be. 

In the stock market, investors often look for value stocks — equities that they can get on the cheap before they increase in price. The same concept applies to a house. The dream is to buy a house that’s undervalued, make improvements, and reap the benefits on the other side. 

As you enter the real estate market, remember that aside from finding a place you love, from a financial standpoint, it’s also about resale value. 

Next time you’re out looking at houses, take pictures while you’re walking around, and spend some time looking at them once you leave. If you really like a place, you can even have a graphic designer render an image of what a certain space could look like after remodeling it. 

6. Local area 

Buying a house requires looking beyond the borders of your property. You also have to think about where the house is.

For example, consider the neighborhood. Assess the quality of the surrounding homes and their projected long-term value. Look at factors like the local economy and recent real estate transaction history. 

It’s also a good idea to look at the quality of the town and your proximity to things like grocery stores, schools, parks, and home goods suppliers. Don’t forget about highways and train stations, either. 

Parents buying a house should also consider opportunities. Look into the quality of the area schools, with an eye toward what matters to you — things like faculty-student ratio, quality of educational programs, opportunities for team sports and clubs, and more.

7. Environmental outlook

Before buying a house, you should also consider requesting environmental data from the town. Look into average air quality and water quality so you can get a sense of whether the area suffers from pollution.

Additional factors to look for include:

  • Mold and mildew 
  • Proximity to water for flooding 
  • Average temperatures 
  • Water restrictions during droughts
  • Fire laws 
  • Well water quality if applicable 
  • Radon 
  • Septic tank age and quality 

No place is going to be perfect. But it’s good to be aware of any potential environmental issues or restrictions that you may encounter ahead of time. 

This is why the home inspection process is so important. The last thing you want is to buy a house only to learn the hard way that it has a leaking underground storage tank that requires environmental remediation.

8. Connectivity 

Connectivity plays a major part in daily life, as more and more devices are becoming internet-enabled. However, not all areas of the country offer the same level of connectivity. 

According to Pew Research, roughly 63% of Americans have a broadband internet connection at home. Rural Americans have consistently lower levels of internet adoption, which is a problem in today’s digital economy where many jobs are online.

When looking at houses, make sure to test your cell phone signal strength. You could also consider contacting local service providers and asking about internet quality. Or you can go directly to neighbors who may be more likely to give you an honest opinion. 

9. Rates 

Mortgage rates

A mortgage rate is the amount of interest that’s tacked on to a mortgage loan. They vary depending on your credit score and financial information and tend to fluctuate depending on economic cycles. Depending on the type of mortgage, you can also get fixed-rate fees or variable fees.

It’s important to try to obtain as low an interest rate as you possibly can so that you are on the hook for less over the life of the loan. Generally speaking, the higher your credit score, the less debt you have, and the more assets you have, the more favorable your mortgage rate will be.

Mill rates

The mill rate refers to the amount of taxes property owners owe based on every $1,000 of assessed property value. Each town has a different mill rate — and sometimes it can vary drastically from town to town. 

Before moving anywhere, research the town’s tax situation and get a sense of how it compares to neighboring communities. Do you really want to end up paying considerably more than the folks one town over?

Insurance

You should also factor in the cost of what it will take to protect your property via homeowners insurance. In most cases, a lender won’t give a borrower a mortgage without proof of insurance.

Factor in the cost of homeowners insurance into your expected monthly payments. Insurance is typically paid for in one lump sum along with your mortgage payment and property taxes.

If you’re unable to come up with a 20% down payment, you might be on the hook for mortgage insurance, too. Unless you’re keen on buying another insurance product, you should seriously consider making sure you can afford that 20% before moving forward with a home purchase. 

10. Closing costs beyond your down payment

When analyzing your financial situation, you’ll also need to factor in closing costs on a property. 

New homeowners are often surprised to learn how much extra cash they need to come up with when closing a property apart from the down payment. There are inspection and appraisal costs to consider, real estate agent fees, lawyer fees, processing fees, and a litany of additional charges that you’ll encounter, which can amount to thousands of dollars. 

If you don’t have the money on hand to cover all your closing costs, you may be able to roll them into your monthly mortgage payments. However, that will increase the total cost of your loan, and you’ll pay more each month. 

That’s why you need to pay down as much of your closing costs as possible to prevent this from happening. 

11. Proximity to friends and family

Finally, consider the house’s proximity to friends and family. 

It can take a lot of time to adjust to a new community, and if you don’t have friends and family close by, the process can be much harder. 

Consider buying a property close to people you know to make the transition to home ownership easier.

Why Buy a House?

Still aren’t sure if buying a house is right for you? Here are some of the major advantages.

Stable payments 

One of the hardest things about renting is that your monthly payments can increase without warning. Changing market conditions can force even the best landlords to raise rates, which means renters need to either come up with the cash or move out and find a cheaper place. 

Mortgage payments can provide greater stability in living expenses as long as you secure a fixed-rate loan. Your taxes and insurance may change over time, but you’ll be able to pay roughly the same amount to mortgage principal and interest year after year. 

Tax advantages 

Owning a home can lead to several tax advantages. Homeowners can potentially deduct mortgage interest, property taxes, and profits from home sales, among other things. If you work at home, you can also deduct home office expenses.

Talk to a tax advisor to see exactly how you can use homeownership to reduce the amount of taxable income you report. 

Build equity 

When you rent, you lose money every month to a landlord. When you have a mortgage, each monthly payment builds equity — or ownership — in the house. 

The more payments you make, the more your ownership increases. Pay each bill on time, and by the end of the mortgage, you’ll own the house outright, increasing your net worth and padding your nest egg.

Drive recurring revenue

Owning a home can lead to a revenue stream if you rent your space on a site like Airbnb

You can also rent individual parts of your property, too. For example, you can rent a parking space if you have a driveway or extra space in your garage or attic. You can also rent your yard for gatherings, your pool to people, or even your garden to someone who wants to grow their own vegetables.

Learn more:

Frequently Asked Questions

Do you have to go through the pre-approval process?

You don’t have to go through the pre-approval or pre-qualification process when buying a home. But it could signal to the buyer that you’re serious about purchasing the property. 

As such, your real estate agent and lender will encourage you to go through the process and get pre-qualified and pre-approved. 

What are association fees?

If you buy a condo or apartment, you’re most likely going to have to join a mandatory homeowners association (HOA). This organization will charge association fees to cover the cost of maintenance and repairs. 

HOA payments can range from a few hundred dollars to thousands of dollars per month depending on where you live and the amenities you have. 

Is it hard to pay a mortgage?

This depends on a few different factors, like your income and the amount of your monthly mortgage payment

The trick is to find a place that doesn’t cost too much more than what you are currently paying per month for rent or an existing mortgage. 

For example, if you pay $2,000 in monthly rent now, you should find a mortgage somewhere in that ballpark unless you have the means to pay more. 

What is a lender?

A mortgage lender is the financial institution that underwrites the loan for your house. This is the company that you’ll work with to secure financing on your property.  

Is a new home better than a used home? 

It largely depends on what you’re looking for in a home. Some people prefer to move into brand-new homes while others prefer used homes and still others prefer antiques. 

One thing to consider is that old homes aren’t always more affordable in the long run. Apart from lower home prices, you could pay more in home improvement and maintenance costs. 

If you’re considering buying a used home, make sure to conduct a thorough inspection — and try to get a sense as to why the seller wants to leave it behind. 

The Bottom Line

The home buying process is a journey that can take a lot of planning, especially for first-time homebuyers. To get a feel for different properties and neighborhoods, you’ll need to spend a ton of time researching online realty websites and driving around house hunting. 

If time is on your side, don’t rush the process. 

Buying a home is one of the most exciting personal finance decisions you can make. Look for your dream home, and get to understand the housing market. Remember that if you hastily buy a house, you could wind up regretting your decision all too soon.

With the right approach, patience, and determination, you and your family can end up in the perfect house that becomes a home you’ll create memories in for decades.

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