Home Buying 101: What You Need To Know Before Buying A House
May 5th, 2011 -- by JonMoultrie
For many people, buying a house is the American dream. It motivates men and women to work hard, cut costs, and save their money. It drives ‘How-To’ magazine and book sales and bolsters the country’s economy. But lenders and sellers don’t require a degree or even a basic knowledge of home buying in order to purchase a house. Instead, anyone armed with a decent credit, a little money, and desire can become a homeowner.Unfortunately, this liberty often is mishandled. Individuals excitedly jump into buying a house without knowing some of the basic things that can keep them from getting stuck with a lemon from ending up in foreclosure five years down the road.
I want you to make a good decision – a wise decision – one that won’t be something you regret or something that comes back to haunt you. Take a moment to look over the following list of do’s and don’ts in home buying and consider this the course you never took.
Home Buying 101
When considering the purchase of a new home …
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DO
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DON’T
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Pay off any existing debt you have and make payments on time. Late payments will affect your credit score. More about late payments.
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Make any big purchases that will affect your credit.
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Make a list of everything you are looking for in a house. Be specific. Click here to fill out a ‘Wants vs. Needs’ checklist.
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Compromise on the things that are most important. It is better to wait for the right house than jump into something that you will regret in five years.
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Consider your income to mortgage ratio. Dave Ramsey recommends that your mortgage be no more than 25% of your take home income. Click here for more. |
Over commit your finances. Lenders may be willing to offer you a loan for more than you can really afford. Meet with a financial advisor to evaluate your finances prior to meeting with a lender and avoid becoming house poor.
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Get home inspections! There is more to a house than you can see and inspections can save you money down the road. Click here for details about home inspections.
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Overlook additional inspections that look for issues like radon, wood-destroying organisms, mold and mildew, lead and rodents.
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Investigate the neighborhood. Visit the house at different times in the day, talk to the neighbors, visit schools, search newspaper archives and ask your Realtor questions. Search city data here.
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Rush into a decision. Take your time and evaluate everything before making a purchase. Regret often follows hasty decisions.
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Consider what renovations need to be done and how this will affect your budget. Talk to your Realtor to determine if you have leverage in making a low bid on a house based on needed renovations. Find out which renovations can affect purchase price here.
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Blow your budget on renovations or over-improve your house. Consult with your Realtor about renovations you are planning to determine how they will affect the value of your home. Discuss your budget for renovations with your financial planner to determine what you can best afford.
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Discuss different mortgage options with your lender. Take time to determine what loan will be best for you today and 10 years from now.
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Get caught off guard by Private Mortgage Insurance (PMI). If you aren’t able to make a deposit of 20%, you will be required to pay for PMI. Find out more about PMI here.
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Do you have a question that I didn’t address? Would you like help purchasing your new house?
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Tags: Arlington Real Estate, Buying a Home, Home Inspections, Mortgage