Buying a home is an exciting and scary time. It can be a great investment in your future, you can finally stop throwing away money on rent, and it is one of the first big steps to laying down your roots. However, buying a home also means you are responsible for all the maintenance, potential problems before and after you close escrow, and are susceptible to the unknown and ever-changing real estate market. So make sure you go into it with yours eyes wide open. Ask yourself all these questions to ensure you’ve covered all of your bases before signing closing documents.
✔ Can I afford it comfortably?
Being able to “afford” a home and being able to afford it comfortably are two separate things. You can walk into any bank with your tax returns or use any online mortgage calculator to figure out what the maximum home price you can afford is based on your down payment, debt-to-income ratio, and interest rate. However, what happens if you lose your job? Can you cover your mortgage for a few months until you find another one?
It’s best to figure out what the highest home purchase price you are approved for is, and then try to come far under budget. Also, you don’t want to spend your entire life savings on a down payment. Make it a goal to have enough money saved away to cover you for at least three months in case the unthinkable happens.
✔ What happens if something breaks?
If you’re a first-time home buyer, you haven’t been exposed to just how much maintenance goes into a home and how expensive it can be when something breaks. If your air conditioner breaks as a renter, you simply call your landlord and they deal with fixing it. Did you know that replacing an AC unit can cost thousands of dollars?
Things in your house will inevitably break. Will you have enough money saved away when they do? Will you even know who to call to fix it, or will you be stuck searching online or thumbing through the Yellow Pages? One thing you can do to protect yourself is invest in a home warranty. A home warranty is an annual service contract that covers most home system and appliance breakdowns. When you experience a covered breakdown, you go online or call the company to file a claim and they send out a contractor to diagnose and fix the problem or replace the unit. In many cases, all it will cost you is a nominal service call fee. Click here to learn more about home warranties.
✔ Do I really need a REALTOR®?
Many first-time home buyers may not understand the importance of hiring a REALTOR. Since online home search sites have become widely popular in the last decade, they may not endorse the value in hiring someone to find them a home plus take a cut of the home price. However, a REALTOR does much more than just find you your perfect home – they negotiate on your behalf and help you navigate the tricky real estate contract. REALTORS know the right questions to ask and can alert you to fishy situations. More than anyone else, first-time home buyers need the knowledge and expertise of an experienced REALTOR to ensure their home buying process goes smoothly before and after the close of escrow.
✔ Have I considered what will happen 5 or 10 years from now?
Many things can happen in 5 or 10 years. Compare the housing market from 2006 to today, for example. Beyond being unable to predict the future of the market, think about what may happen in your own life in the next decade. Are you planning on having kids? Will this home have enough room for your growing family? What about the school districts your home is located in? Are they up to your standards or will you need to look into private schooling? Remember that most mortgages have a 30-year contract associated with them. While that doesn’t mean you have to stay in your home for 30 years, it does mean that you are making a serious commitment and need to think about your life in the long term.
✔ Am I buying based on the things I can change, or the things I can’t?
Many new homes can look appealing with their shiny new appliances, bright new flooring, and sparkling countertops, but all of those things are cosmetic and can be changed in any home you buy. While these features may be nice to have, they should be just that – added bonuses to a home that already has everything else you want. Certain things you cannot change about a home include lot size, location, school district, proximity to neighbors, and major layout changes. Is the home on a busy street? Do you walk outside to your micro-sized backyard and stare into your neighbor’s home? Even if these things don’t bother you, they will make reselling your home in the future more difficult. Try to find a home that has everything you are looking for that you cannot change, and make cosmetic updates in the future as you are able.