4 Questions to Ask Before Buying a Home

Whether you’re a first-time homebuyer or a seasoned real estate investor, buying a home is an exciting process. However, there’s also a lot to consider when you decide to buy. So before you begin your search for the perfect property, here are four questions you should ask yourself. What do I want? Take the time to figure out what type of property you want to buy. From single-family and multi-family homes to condos and co-ops, there are many different options on the market and it’s important to choose the type that best fits your needs. Figuring out the town or neighborhood you want to live in is equally important. While a property might have all of the amenities you’re looking for, factors like crime rate and proximity to highways can impact the overall home owning experience. A good idea is to list out and prioritize your needs (e.g. large backyard, great schools, quiet street) before you begin your search.

What can I afford?
The rule of thumb is that you should never spend more than 30% of your monthly income on a mortgage payment. An alternate rule states that you can afford to buy a property that runs about two-and-a-half times your annual salary. For a more tailored look at what you can afford, use an online mortgage calculator to see what your monthly mortgage payments would be if you bought a home today. Your lender’s preapproval will give you the clearest idea of how much they will allow you to borrow. Am I financially prepared?
A few months before you start searching for a home, review your credit history and make sure it is in good standing. Get copies of your credit report, ensure that it’s accurate, and fix any issues you discover. It’s likely that you’ll also want to get preapproved for a home loan, which will put you in a better position to make a serious offer once you find the right property. Preapproval from a lender is based on your credit history, debt, and income, as well as the amount of cash you’ll be putting down towards your loan. How do I make the best offer possible?
Do your research and discuss it with your agent! Your opening bid should be based on the sales trends of similar homes in the area. So before making your opening bid, get online and review the selling prices of comparable properties. If these properties sold for less than the current asking price of the home you’re looking at, you can feel comfortable making a bid that’s slightly lower than what the seller is asking. Also consider the condition of the home in comparison to others, number of days on the market, and whether or not you’re competing with other offers. Ultimately, the lender’s appraisal will have the final say on whether or not your purchase price meets the home’s value. If your offer is higher than the appraised value, you can: a) try to renegotiate with the seller, b) put more money down to make up the difference, or c) terminate the transaction. Keep in mind that the best offer doesn’t always mean the highest price. Other factors to consider are the terms of the sale agreement, including closing time frame, allowing the seller to stay in the home at no charge after closing if they need a little more time to move, shorter inspection period, a large downpayment, not asking for seller contributions towards your closing costs, paying for your own home warranty, etc. These are all items which can entice a seller to choose your offer over others. Your best bet is to make sure the agent representing you has a conversation with the listing agent to find out what kind of terms the seller is looking for.