While sharing on the “My experience in . . .” buying a house podcast a few weeks back, I listed a few things that I would do over if I could on my home purchase. Unfortunately you can never go back and have a do over, but you can learn from your mistakes or the mistakes of others and be prepared when it is your turn again. With that being said, here are some tips that I recommend when looking to purchase a home.
Have information beforehand
Before starting the process you should know before hand what your price range is. Do not just go by the purchase price, but rather how much your mortgage payment will be. It’s also important to not only know how much you can afford but to also stick within your price range! A lot of times if you go into it with a vague idea of how much you can afford, you can get sucked into a house that is a little too rich for your income. This can lead to huge problems down the road as you too much of your income is going to your house. Also know how much the property taxes are in the area as higher property taxes will cause your payment to increase and could push you out of your price range.
Have a big down payment
How much of a down payment do you need? The more the merrier I say. Having a big down payment not only decreases the monthly payment, but also more importantly can allow you to avoid Private Mortgage Insurance (PMI) if you put down 20% or more. PMI is a cost you pay as a buyer to protect the lender in case of foreclosure. It’ll cost you around $50 a month for every $100,000 you borrow, so having a big down payment will save you from paying an unnecessary expense each month. Also, by putting more money down you will have instant equity in your house. With more and more houses being underwater, this will help protect you in case of an emergency if you have to sell the house quickly, by not having to do a short sell.
Finally, the last tip is to have patience when looking at homes to purchase. It is not a race, and in case you have not noticed, it is a buyer’s market, so use that to your advantage! Whenever you fall in love with a house and get “house fever” you lose negotiating power because your ability to walk away from a deal is gone. Remember your home is where you make it; a house is simply a building. So by being patient you will be able to get a great deal on a home!
Purchasing a home is probably the most expense purchase you will make in your lifetime, so make sure you do it right. You want your home to be remembered as a blessing and not a financial curse. What are some other tips that you might have dealing with the purchase of a home?