Home buying can be a very exciting process, but it can also be very scary and intimidating, especially if this is not your first time going through it. Lower your anxiety by knowing what to consider before you purchase.
1. Shop for a Mortgage
The first step to buying a house is securing financing. This means you should shop for a mortgage.
Many banks will offer attractive rates and terms, but do not limit yourself to one bank. Shop around, compare the options available from different lenders, and choose a mortgage that fits your needs well.
You can use various online tools to help you estimate your monthly payments and determine which loan option best suits you before doing anything else.
2. Research Your Area
If you are buying a home in an area where prices have been rising rapidly or keeping fairly steady, there is a good chance that they may continue their growth in the future. In this case, it would be wise to buy while the buying is good.
The thing to remember, though, is that prices in the area will not continue their rise indefinitely, so you should try to estimate when they will peak and begin to drop so that you can buy at the right time.
If you are buying near a large metropolitan area, what do people who already live there tell you about it? Do they like living there or, would they rather be elsewhere? Access online resources for more information on your prospective home’s neighbourhood.
3. Get Yourself Pre-Approved
Pre-approval is a step many people overlook. When you get pre-approved for a mortgage, the bank will give you an estimate on how much it is willing to lend you.
If you are trying to buy in a more expensive area, this number may not be very high, which can put you at a disadvantage against other bidders who are pre-approved for bigger loans.
Even if your budget allows for that nice house with the view of the city skyline, if the seller already has another offer available that is backed by solid financing, he or she will go with whoever makes them more money. Having pre-approval could be key when it comes time to negotiate.
3. Inspect the Property
Even if you are buying a house that needs some work, it is best to hire an inspector to check it over before signing off on the purchase. The last thing you want is to buy a home that costs even more to repair.
What kinds of inspectors do you need? First, you need someone who specialises in property assessment, particularly one knowledgeable of electrical power, plumbing, and foundation issues.
You might also want to hire a pest control specialist to check the house for termites or other pests. The inspector should give you a full report on all their findings and make recommendations for repairs if needed.
The information you will obtain from the inspection can help you decide whether to include a contingency clause in the contract. If you find that the house needs too many expensive repairs, you will have the opportunity to ask the seller to either lower the asking price or delay closing until those issues are addressed.
4. Meet the Down Payment Requirement
Even if you can get pre-approved for a mortgage, it is unlikely that you can buy the home without putting some money down. Even if the seller would allow for closing costs on your end, banks will often want at least 5 per cent of the purchase price before they sign off on the deal.
Fortunately, there are many ways to pay the down payment. You may have some savings that you can use or ask a family member to help out. Check your area too if they offer any down payment assistance.
5. Be Sure You Can Make Your Payments
As important it is to find a place you like and can afford, it is also vital to make sure that you can make your payments. Use a mortgage calculator to determine if you can truly afford the home after factoring in your other monthly debts such as student loans, credit cards, etc. This will help prevent any surprises down the line when things are not going so well financially.
A good rule of thumb is look at what you spend in a month for housing now and add at least a hundred pounds or so to cover taxes and insurance.
Buying a house is a big step in anyone’s life, but it should also be one that is thoroughly planned. If you consider the points made here and give yourself enough time to research all your options before making the final purchase, then you will have a positive experience. If you rush into things because there are offers on your dream home, buying may turn out to be more trouble than it’s worth.