You’ve decided that it’s time to buy a house. That’s great. However, you should know a few things before buying a house. So in this article, we’ve put together 13 things to help you make an informed decision when getting your dream home.
Buying a house is a major financial decision, especially if you’re a first-time buyer. So you want to make sure that you do your due diligence carefully and you know what to expect.
Overlooking some of these things before buying a house can bring you more trouble down the road such as a higher mortgage rate, high repair bills, or even have your house value go down if you want to resale.
Here Are 13 Things to Know Before Buying a House:
1. Check and repair your credit score
One of the most important things to know before buying a house is your credit score. Your credit score will influence your interest rate and monthly mortgage payment.
So before you plan on applying for a loan, you should probably try and repair your credit score and bring it above 700. The savings that you will make by having a good credit score are huge. We’re talking tens of thousands of dollars that you can save during the loan term.
2. Shop around for a mortgage lender
You will have to do a bit of legwork here, so take the time to research and compare all the mortgage lenders in your area.
You can do it more easily online these days, so you don’t even have to do actual leg work. Technology is amazing, isn’t it?
So, with your papers and credit score in order, go over a few lenders either online or locally, and check and see what their offers are.
The most important thing would be to get a low mortgage rate, but you should also consider the annual percentage rate (APR) and closing costs as well.
After that, try and get pre-approved by a few of them, and then when it’s time to get the loan, go with one that makes more sense for your homeownership and financial goals in the long run.
3. Factor in all the expenses before buying a house
There are many expenses that come with the process of buying a house. Some of the more popular ones are
- closing costs
- the commission for the realtor
- paying for a home inspection
- property tax
So in order to not have any surprises down the road, it’s better if you acknowledge some of these expenses before buying a house. This way all your money will be accounted for, and you should be able to handle every expense when necessary.
4. Decide on what type of house to buy
Decide what type of house you want to buy. Do you want a home in the suburbs, an apartment, or a condo that’s closer to the city center?
There are many types of residential property that you can buy such as a traditional home, a townhouse, a duplex, a condo, a multi-family building with more units, or a co-operative.
So depending on your homeownership goals, you should weigh the pros and cons of every housing type and then decide on something that will help you achieve your goals.
5. Work with skilled realtors
A skilled realtor can make all the difference. They should know the area very well and be able to answer any questions that you might have about the property and the location.
If you’re buying a house in a new area that you’re not familiar with, the best person to ask for more details about it is your realtor.
So because of that, you want to make sure that your realtor knows the area well they can give you key information like what other homes in the area are worth, if the neighborhood is soaring in popularity, etc.
This will ensure that you’re not going to overpay for the property, and also you will learn if there’s potential to make a profit by selling the home in the future for more, especially if it’s going to be a fixer-upper house.
So as with mortgage lenders, you want to shop around for a bit and find some real estate agents that have successful sales under their belt and are also well recommended by other people in the area.
6. Research the value of the property
For starters, the realtor should give you some clues and answers about the value of the property, so that you know if you’re overpaying for the house or not.
But you should also do your due diligence and search for some info about the area and the house yourself.
There are plenty of sites online where you can see average prices for the houses in that neighborhood so that you can make an estimate if you’re overpaying for the house or not.
7. Know how much house you can afford
Here’s the thing, the bank might call you one day and tell you hey, congrats you qualify for a $250,000 mortgage. While you probably got qualified for a much higher amount than you have expected, you shouldn’t lose focus.
Stay on the budget. If you had in mind to purchase a $170,000 house, this doesn’t mean that now you should be looking for houses up to $250,000.
So it doesn’t matter what the bank offers you. What matters is how much can you afford to pay each month in order to still have a normal and enjoyable life, without eating soup for dinner every night.
Set your own affordability and don’t go into even more debt, just because you received some higher than expected loan offers.
8. Verify all information in the listing
Go through all the information with a fine-tooth comb. Make sure that everything is in order, the address matches the description, the size of the plot, etc.
Another issue might be the fact that the agent lists some features that the house doesn’t actually have, and sometimes there’s also the issue of what gets to stay in the house and what gets taken away.
Some people including realtors don’t know the difference between fixtures and personal property, so make sure you know before-hand what things and features are included in the price of the house.
Don’t be afraid to ask questions if you think that something is not right, it will only save you a lot of money and time down the road.
9. Use professional home inspectors
One major thing that you want to know before buying a house is to find out the condition that is in. And for that, it’s best to hire a good home inspector to do the checking for you.
Ideally should try and find one that’s part of the American Society of Home Inspectors.
But if you can’t find any in your area, then your realtor might be able to refer you to a good home inspector.
Sure there are a few bad realtors out there that might refer you to someone who’s not that professional and they are after getting a quick check, but most of them are not like that.
If you don’t trust your realtor, because maybe you didn’t have enough time to get to know them then it’s advised to find your own home inspector.
You should never skip over this step, as a home inspection is one of the most important things that you need to do before buying a house.
10. Problems you should look for before buying a house
There are many things that can go wrong with a house, starting from the structure all the way up to the roof. So that’s why you want to make sure you don’t skip over the home inspection process.
Here are some things you need to look out for before buying a house:
Does it have any water-related damage or problems?
- Check if the roof is leaking
- Inspect the pipes, see if they are free of rust and unclogged
- Look out for moisture
- Mold is a serious health issue so make sure that there isn’t any
- Check out the drainage system
Are there any traces of asbestos?
One important thing to know before buying a house is if there was any asbestos involved in the construction process.
If asbestos was used when building the house, it will lower the resale value if you plan on selling the house in the future. You will also have to spend a lot of money to have professionals remove the asbestos under proper conditions.
Asbestos is a huge health issue, that can trigger serious diseases such as cancer, including mesothelioma and asbestosis, so you definitely don’t want that around your house.
Many older houses and buildings were built using asbestos up until the late 1970s. So ask your home inspector to look for this.
Check the electrical system.
You will also have to look out for any old or faulty wiring and electrical system that the house might have.
The building codes these days are based on modern electrical wiring. So if a house was built before the 1930s chances and it wasn’t renovated to current standards, then you will have to do it yourself.
For example, old houses from the 1900s use a knob and tube wiring electrical system, which isn’t really unsafe on its own but can be a risk if there is insulation placed on top, or if the system was modified or damaged.
Usually, insurance companies won’t insure your home until you replace the old knob and tube wiring system with a modern one. Sometimes even lenders won’t approve your loan if the house has that old electrical system in place.
The costs to replace the electrical system yourself can range from $7,000 to $15,000 or more depending on the house size.
11. Is the home part of an HOA?
It’s good to know before buying a house if the home belongs to a homeowner association (HOA). In general, all condominiums and other co-operative properties will have HOA.
There are pros and cons for belonging to HOA.
A few pros: they will take care of the lawn and landscape for you, they could increase the value of your home (homes under HOAs sell for about 4% more) another pro is that you will have lower utility bills as many of those are paid by the homeowner association.
Some cons include the high fees (also known dues) that are mandatory, you will also have to pay additional fees on your mortgage and insurance if the house belongs to an HOA, and finally, you won’t be able to do things to your house that the HOA doesn’t approve of (for example painting your house pink if the rest of the neighborhood uses white).
12. Don’t risk not getting your loan approved
Here’s another important thing to know before buying a house: don’t do anything that might affect getting your house loan.
When you’re shopping to get pre-approval for a mortgage, the lenders will work with the information you provide them at that moment.
So for example, if you suddenly change jobs or decide to buy a new car, you might get your mortgage request denied.
Try not to do any big purchases and play it safe with your job before you get pre-approved at least.
13. Think about the future
It’s also important before buying a house to also think about the future. For example, if you plan on having children, then staying at home for a few months or years could make it harder to pay the monthly mortgage rate.
Also, it’s good to know if you can make a profit from the house if you decide to sell in the future.
Another thing that you might have to take into consideration is the potential of buying a fixer-upper in an up-and-coming neighborhood. So ask your realtor for more details about the area and their opinion on it.
Final Thoughts on Things to Know Before Buying a House
So there, you have it, a few important things to know before buying a house. The most important thing is to take your time and do a lot of research before you take the plunge.
Also, don’t get caught up in the hype, and get a bigger loan than you really need. You don’t want to stay in debt for longer than necessary.