10 Facts About Buying a House That You Should Never Ignore
Buying a House? Here Are 10 Facts About Buying a House That You Should Never Ignore
Buying a house? Are you prepared to enter the housing market? An individual’s choice to purchase a home ranks among the top five most important financial decisions they will make.
Here are ten things you should know before purchasing a home, from how to negotiate a price to the advantages of working with a real estate agent.
#1: Hire a reliable real estate agent.
Since real estate agents typically receive a commission based on the final sales price of a property, some potential buyers may be hesitant to work with one out of fear that doing so will increase the price of the transaction.
Remember that the vendor, not the purchaser, is responsible for paying the commission.
In Mumbai, JPJ Group warns purchasers that a property manager (the agent representing the seller) won’t look out for their best interests since “that agent would just pocket both sides of the commission.”
You are thus not conserving resources.
A good real estate agent that is on your side will look out for you and help you through every step of the purchase, from making an offer to going through the home inspection process.
#2: Things to keep in mind:
Contracts are standard procedure when buying a home. In the process of purchasing a home, you will be required to sign certain documents.
Moreover, there are additional legal documents to complete. Most of those documents look like “normal” purchase agreements for houses, but they fact contain no wiggle space for the buyer.
Not even close to being accurate. In most cases, a contract can be improved through negotiation. Do not feel obligated to sign a boilerplate contract.
If you need extra time to assess the results of your home inspection, don’t want to bother with a radon test, or need your mortgage approved, you can negotiate such conditions into the purchase agreement.
Here is where the assistance of a professional realtor comes in handy.
#3: You shouldn’t always buy for the life you have right now.
Buying a house is likely to be one of the largest single investments you’ll ever make.
Think about the big picture before committing to the purchase of what you hope would be your forever home.
Are you committed to remaining in your current position? What’s the plan? Planning a family or buying a house?
It’s possible that you won’t make any significant progress toward paying down your mortgage principal for the first five to seven years (this will vary depending on the market and the terms of your mortgage), so you should probably keep looking if you’re not absolutely certain that this is the right house for you.
#4: Take some time to reflect on your dedication.
It’s not just your mortgage that we’re referring to.
Generally speaking, the treatment of marital assets and their distribution in the event of a divorce are governed by the laws of the state in which the couple resides at the time of marriage.
When you’re single, you’re not always subject to the same regulations. Therefore, you should plan beforehand.
Be prepared for the worst when you buy a house with a significant other who is not your spouse.
Titling, mortgage payments and liabilities, repairs, and the like are all topics that should be addressed in a written agreement (and yes, we would advise hiring a lawyer).
#5: Don’t just paint over it.
You probably have at least one room in your ideal home that you’re already planning to remodel.
Remember, adds Dhiraj, that it’s cheap to address cosmetic faults (a bit of paint or some wallpaper), but it can be expensive to make adjustments to kitchens and bathrooms.
The cost of labour, he explains, can easily double or triple the price of materials like cabinets, refrigerators, and countertops.
That doesn’t mean you have to write off a house because of major repairs, but you should take into account the price of such repairs when figuring out whether or not to buy the house.
#6: Spend no more than you can comfortably afford on a home.
The amount you’re approved for may differ from this estimate. My now-wife and I were accepted for a mortgage that was around three times larger than the amount we finally spent on our first home.
Working for well-known firms as recent law school graduates, our income projections seemed healthy.
Since we weren’t confident that our income and expenses would remain at those levels, we lowered our expectations.
Two years later, as the economy began to decline, we took the plunge and opened our own venture.
The smaller mortgage payment was a blessing while we were experiencing a temporary reduction in income.
What is the optimal proportion, then? Mortgage, insurance, and property taxes can take up to 28 % percent of a borrower’s monthly take-home pay, according to the Federal Housing Administration.
Market, mortgage interest rate, expected income, and mortgage type are all variables.
If you’re confused about the state of affairs, see a mortgage broker.
#7: Don’t get too caught up in the asking price.
Be sure to factor in not only the purchase price, but all the expenses that come with buying a property. Insurance, HOA dues, and property taxes all fall under this category, and can add up quickly depending on where you reside.
In addition to the price of repairs and renovations, homeowners may also have to shell out cash for upkeep.
Swimming pools, elaborate heating and cooling systems, and detached structures all require maintenance, so be sure to inquire about the associated costs.
Last but not least, JPJ Group recommends making sure you’re comparing like properties; a condo with a low price but a high monthly fee, for example, could end up costing you more than a higher-priced condo with a lower fee, and a cheap home with high taxes could end up costing you more than an expensive home with low taxes.
#8: Think about your student loan burden.
Housing crisis tightened lending requirements. Student loans are not a small annoyance.
For many first-time homeowners saddled with student loan debt, a significant change to FHA criteria in 2015 has been a deal breaker, as explained by JPJ Group, a qualified Prospect Mortgage Branch Manager in Pennsylvania.
A borrower is now charged 2% of the outstanding student loan total regardless of deferment status (with a non-FHA, or conventional loan, the fee is 1%).
To provide your lender with the information they need to accurately determine your ongoing student loan liability while your loan is in deferment, JPJ recommends registering in an income-based repayment plan and keeping any documentation related to that plan on file.
#9: You shouldn’t rely too heavily on the deduction for mortgage interest rates.
As a result of the home mortgage interest deduction, many people overextend their financial means to purchase a home.
A third of filers utilize schedule a to deduct mortgage interest.
If you have more deductions than the standard deduction—for 2015, that amount is $12,600 for a married couple filing jointly and $6,300 for an individual—you will need to itemise (those rates stay put for 2016).
If you’re in the 28% tax rate, spending an extra $5,000 in interest will only “save” you $1,400 in taxes, even if you itemise your deductions.
And the longer you keep your house, the less interest you will owe, but you can’t expect those savings to continue at the same rate forever.
While this is great for increasing your equity, it will reduce your tax benefits.
#10: Getting a house isn’t mandatory.
No one should feel pressured to buy a home by 35 or any other age. Not everyone is financially ready to be a homeowner.
It’s important to think about the housing market, interest rates, timing, and your long-term goals.
Perhaps your job and family goals are changing, or you just want more leeway. A realtor can also advise you on whether or not to rent first to get a feel for a community (see tip #1 again).
You don’t have to flip the switch just yet, though; many regions have thriving rental markets, and in certain places, young professionals are opting for rentals over home buying in order to save money and maintain flexibility.
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