Affordability calculators are only as good as the numbers you plug in. Here’s how to get your numbers right and then find a price tag.Full article
Avoid buying the wrong home
November 19, 2018
There are all kinds of ways to go wrong when you buy a home.
Maybe you fall for a good-looking place that doesn’t meet your needs, and you do the equivalent of getting married in a hotel wedding chapel in Las Vegas. Maybe a serious mold problem reveals itself too late, and you’re left with an $80,000 clean-up bill. Or maybe you simply get in over your head on your mortgage.
Fortunately, it’s not that hard to avoid a major mistake. Here are five simple homebuying must-dos that could save you a lot of heartache (and money).
1. Have a mission statement
Any business has to be clear on its mission, or it risks heading down the wrong path. You don’t need an MBA to understand that. Well, the mission concept applies to buying a home too.
Always start by asking the question, Why am I buying a home?
It’s one of those questions that’s so obvious, you might forget to ask it. But if you’re not clear on your main reason for buying a home, you’re at risk of buying the wrong one.
For example, is your mission to raise a family? Make an investment? Live sustainably? Age in place? Those things might not be mutually exclusive, but most likely no one home will be able to do it all. So what tops your list?
2. Know what you can truly afford
The right home is one you can afford without being “house poor” — spending so much on your mortgage that you have a hard time paying for other necessities, not to mention the occasional night out.
The standard guideline is to limit housing costs to 30 percent of your income. Your comfort level might be higher or lower, depending on things like the size of your paycheck, your debt load, your job security, and your tolerance for sacrifice.
So how much house can you afford? We put together a six-step formula that can help you find a realistic price tag. It accounts for expenses that first-time buyers tend to overlook or underestimate, like property taxes and condo fees, which can take a big bite out of your monthly budget.
Keep maintenance costs in mind too. A very general guideline is to plan on spending a minimum of 1 to 3 percent of your home’s purchase price on maintenance every year. Say you buy a $200,000 home; 3 percent is $6,000. An older house usually demands a bigger maintenance budget.
To really dig into the affordability question, consider making an appointment with a professional homeownership advisor. To find one near you, visit our lookup page. Most of the advisors in our network offer their services for free.
3. Don’t confuse needs and wants
This is very easy to do! Who among us hasn’t spent a few too many afternoons daydreaming at Houzz? Do you need stone countertops and exposed wood beams? Or do you really need bedrooms for the kids you plan to have?
In short, needs are virtual deal-breakers; wants are optional, to varying degrees. If you don’t have a handle on what’s what, you could end up with a beautiful house that just doesn't work for you.
Try spending some time with our needs vs. wants checklist. It’s a great homebuying tool that helps you zero in on what’s really important to you.
4. Hire a real estate agent you can trust
It’s tough to balance all this stuff. It’s good to have a trustworthy advisor who can bring some objectivity to the table and make sure you ask yourself the right questions. Your real estate agent can be that advisor.
A really great agent will listen closely to your needs and wants and even help you tease them apart. They’ll also help you with the reality checks that a lot of us need when we’re home shopping — sticking to a budget can be frustrating.
In other words, a trustworthy agent won’t just want to get you into a house and move on to the next commission. They want to get you into the right house. How do you find this dream real estate agent? Check out our list of 10 things to look for.
5. Hire a skilled home inspector
It’s not hard to find stories about home purchases that turned into financial nightmares. Just Google “My house is a lemon.” Cracked foundations, leaky pipes, black mold, defective wiring … Anything like that can bring your new-home honeymoon to an abrupt end, draining your savings and then some.
That’s why it’s critical to find a skilled, reputable home inspector to take a hard look at your home-to-be. Even huge problems aren’t always obvious to the untrained eye (or, honestly, sometimes even the trained eye). And you can’t count on the current owner to reveal deal-breakers.
In addition to hiring a generalist, you might want to hire one or more specialists to be safe, depending on the home and its location. For example, you’ll need specialized inspections to detect pests, lead, and mold, which can all be potentially costly. Private sewer systems and/or wells are two big-ticket items that should always be inspected too.
Filed Under: For Homebuyers