Home Buying: How to Ensure That You’re Ready
Calculate your budget
Before even looking at houses it’s important to calculate what you can comfortably afford to spend on a home. Using a mortgage calculator where you can estimate your monthly payments based on the home price and interest rate will get you part of the way to determining your budget. That being said be sure to include property tax, homeowners insurance, and other expenses associated with owning a home that will also affect your your finances. A good resource for helping you determine those costs is the New York Times’ rent or buy calculator.
Another way to set your max budget is to work backwards from what you have saved up for a down payment. The typical recommendation is that your down payment make up 20% of the house’s purchase price. So, if you have $30,000 for a down payment, it might be reasonable for you to look at homes that are listed for up to $150,000. Also remember that there will be closing costs you’ll need to pay (or negotiate for the seller to pay) when buying so be sure to factor that in as well.
See what’s available and what homes go for in your area
After determining your budget it’s also a good idea to make a list of all the things you absolutely need in a home as well as a few things that would be nice to have. The next step is to visit sites like Zillow or Realtor and see what you can find in your price range. During this process you’ll be able to see what a home that meets all of your wishes will cost you in the area you’re looking to live in. Additionally, if you’re considering multiple areas, this will enable you to get a basic overview of the home prices in each without having to physically travel around and perhaps even allow you to narrow down your search.
Visit an open house
One downside to only looking at homes online is that pictures don’t always capture a home properly. In that case you may want to search for open houses in your desired neighborhood. Even if you aren’t interested in the particular property being shown this will once again give you a better idea of how far your money will go in the area without committing to hiring a realtor just yet. On the other hand, if you do happen to hit it off with the agent selling the home, you might save yourself a step later on when you’re ready to start looking seriously at buying.
Go find your new home (or don’t)
If you’ve done all of your research, calculated your budget, and have confirmed that a certain area is right for you then — congratulations — it’s time to start house hunting for real. Just remember all the work that went into determining how much you should spend and don’t let your “dream home” sway you into spending more. Additionally don’t allow your desperation to buy a home lead you to purchase something that doesn’t meet your needs or that requires more work than you’re capable of handling. Remember: even if you’ve come this far it’s okay to walk away. In fact it’s far better to do that than to end up with a house that will hurt your finances in the long run.
Buying a house is not something that should be taken lightly. Luckily today there are several tools that you can use to arm yourself with the knowledge you’ll need to make a proper purchase decision. Happy house hunting.