1. Use a trusted realtor.
We all know that realtors get a cut of the sales price of a home which makes some buyers hesitant to use a realtor: they believe it drives up the overall cost. Keep in mind that the seller, not the buyer, pays the commission. A savvy realtor who works for you can protect your interests and guide you through the buying process – from negotiating a price to navigating home inspections.
2. Remember that a house purchase involves a contract.
When you’re buying a house, there are papers to sign. And more papers to sign. Many of those papers – which are actually contracts – look like “standard” home buying contracts with no room for negotiation. That isn’t true. Contracts are meant to be negotiated. You don’t have to sign a standard agreement. If you want more time to review your inspection, wish to waive a radon test or want to make a purchase subject to a mortgage approval, you can make that part of the deal.
3. Don’t necessarily buy for the life you have today.
Chances are that buying a house will be one of the bigger financial commitments you’ll make in your lifetime. Before you agree to buy what you think might be your dream house, consider your long-term plans. Are you planning on staying at your current job? Getting married? Having kids? Depending on the market and the terms of your mortgage, you may not actually pay down any real equity for between five and seven years: if you aren’t sure that your house will be the house for you in a few years, you may want to keep looking.
4. Think about commitment.
That means you need to think long term. When you get married, the laws of your state generally determine how your assets are treated – and ultimately how they’re distributed at divorce. When you buy a house with your significant other who is not your spouse, make sure you have an exit plan if things don’t go the way you hope. It’s a good idea to have an agreement in place with respect to titling, mortgage payments and liability, repairs and the like: it’s best to get it in writing
5. Look beyond paint.
It’s often the case that your dream house has that one room that you’re already fantasizing about changing. Remember that it’s fairly inexpensive to fix cosmetic issues ( paint or some wallpaper) but making changes to kitchens and baths can be expensive. That doesn’t mean that you should give up on a house in need of a significant fix but you should factor in those costs when determining whether you can afford to buy.
6. Buy the house you know that you can afford.
This can be different from the price that your mortgage company believes that you can afford. So what’s the best ratio to use? Some lenders suggest that you can afford mortgage payments totaling about 1/3 of your gross income but others suggest closer to 28% for housing related costs including mortgage, insurance and taxes. There are a number of factors including your projected income, interest rates, type of mortgage and the market. Ask your mortgage broker to help you understand what’s in play.
7. Don’t fixate on the purchase price.
The purchase price is just one piece of owning a house: be sure to consider all of the costs associated with your potential new home. That includes the cost of insurance, homeowner association fees and real estate taxes – depending on where you live, those can quickly add up. And it’s not just home improvements that can cost money: maintenance costs dollars, too. It’s a good idea to ask questions about upkeep for extras like swimming pools, fancy heating and cooling systems and out buildings.
8. Consider your student loan debt.
Following the housing crisis, lending laws tightened. Student debt isn’t merely an annoyance: it’s treated like real debt. A major revision to FHA guidelines in 2015 negatively affects many first-time homebuyers with student loan debt. Prior to this change, a borrower with student loans deferred for more than 12 months could discount that debt from their liabilities: now, for purposes of determining purchasing power, a borrower is charged with 2% of the outstanding balance of the student loan regardless of deferment status (in a non-FHA, or conventional loan, it’s just 1%).
9. Don’t get carried away by the home mortgage interest deduction.
Many taxpayers are tempted to buy more house than they can afford by figuring that they’ll save enough with the home mortgage interest deduction to make up for it. The mortgage interest deduction is only deductible if you itemize on your Schedule A: only about 1/3 of taxpayers claim the itemized deduction.
(Source: Forbes, #LifeHacks)