5 Things Every Home Buyer Needs to Know Before Buying
February 19, 2014 | Damara
Do not buy a home without reading these 5 Free Tips:
1. Get qualified for financing!
Even if you are a cash buyer, find out your options. Financing (mortgage qualification and terms) are the first step in the home buying process. Really! Most people think they can afford a certain amount of money and they are usually wrong. Some can afford more than they thought, and some less. A qualified mortgage broker will tell you if you are eligible to buy immediately or what changes need to be worked on to qualify in the future, how much you can spend, and what your interest rate and monthly payments will be. Without this knowledge, you are on a blind and costly search to your new home. There is nothing worse than finding your dream home only to find out you can’t qualify for a mortgage at this time, or for this amount of money. Don’t waste your time and energy! Mortgage pre-qualification is often a free service that takes less than a half an hour. Call your local mortgage broker, or visit your local bank branch and get qualified before the search. Most experience real estate agents need to see your letter of qualification before searching, and you will definitely need this letter to show any seller when making offers on a property.
2. Know that your mortgage is only half of your monthly housing expense.
Many Buyers tell me they can spend X amount monthly for their mortgage, and I always ask them how much they can spend for homeowner association maintenance fees, insurance, taxes, lawn care, cable and all other household expenses. The general repy to this question is that they never considered it. Buying a home wih a mortgage will cost you 1% to 1.5% of the purchase price monthly to run the home. An example…a $300,000 home may cost you $3,000 to $4,500 a month if you include all the extra expenses. If you are buying all cash, then expect the same expenses minus the mortgage. Your total expense may be double the mortgage payment you were quoted. Plan for it!
3. Get a professional home inspection by a licensed inspection company.
Most contracts have an inspection period, use it! Don’t call your uncle, of friend’s dad, call a licensed inspection company who will give you a detailed report with cost estimates of repairs. This is the only way to know the true history of the house. Also, the written report may help you negotiate your contract price if there is extensive damage.
4. Expect every home to have damage or needed repairs, including a new construction home.
I always tell buyers of a new construction home to do a professional inspection. Usually, there are a list of minor punch list repairs needed that are often covered by the builder’s waranttee. For older homes, expect a longer list. Most items will be petty, but can add up. Usually, these items in need of repair are due to deffered maintenance from the seller. The biggest red flags to negotiate with a seller are air conditioning, roof, termite, plumbing, mold and electrical issues. Cosmetic issues are rarely warranted or negotiable. A normal house inspection for a resale home will have 1% to 2% total repair cost of the purchase price. An example…a $300,000 house may have $3,000 to $6,000 in minor total repairs after an inspection. This would be acceptable. Anything higher should be considered and negotiated.
5. Always use an experienced, licensed real estate agent to purchase your home.
This is a free service to Buyers in most areas. Take advantage of it! Let me dispel all the common myths out there. You are not getting a better deal “By Owner” because they are saving commission. The Seller already added that saving in their price. Also, the best deals are gotten when you have an arms length transaction with a third party who experienced, and armed with facts and research is negotiating the best price and terms for you. This person is a real estate agent. The next popular myth is that you are getting a better deal going direct to the listing agent. So you look online and at signs, and call the listing agent direct for the best deal. Another fail. The listing agent gets paid by the Seller. Therefore, there interest is to get the highest price for their commission and their Seller. Also, they usually have formed a relationship with the Seller during the time they are selling the house, and will not want to work against the Seller negotiating for the Buyer who is not paying them. Lastly, the listing agent is getting the same commission as if you have your own real estate agent negotiating on your behalf. Seller does not usually same any money you were hoping would be passed on to you, the buyer. Get your own real estate agent, who is experienced and a great negotiator to help you find the best home for the right price.
photo courtesy of Rachel Sian