There are no dumb questions, just dumb buyers. And, the dumb buyers are, coincidentally, the ones who never ask any questions. With that said, some questions are more valuable than others when it comes to buying a home. Before you make any serious commitments, and even before you talk with an agent, you should have a good answer to all of these questions.
Are You Ready To Buy?
It’s OK to not be ready to own a home. There are lots of successful people living in New York City that still rent. But, it’s not just New York City. There’s a stigma associated with renting. But, rich people actually do rent – they also buy. It just depends on the economy and whether they want to commit to a home. Poor people rent because they can’t afford a home. Meanwhile, the middle class are typical buyers of real estate. So, there’s no real correlation between success or wealth and owning real estate.
What you have to ask yourself is whether you’re emotionally ready to plant roots. If you can answer “yes,” it might be time to buy a home.
What Does The Landscape Look Like?
It’s easy to compare rental properties in your area. When you look at buying, though, you have to factor in a lot more – like taxes and maintenance. There’s also homeowner’s insurance and possibly an HOA fee that you’ll be responsible for. What you really need to do is sit down with a good mortgage calculator and figure out whether it makes sense to rent or buy.
You can also talk to an agent through Agent Harvest to get a sense of the real estate market in your area. Is it a buyer’s market? A seller’s market? These are things you want to know.
What’s Your Plan?
It’s hard to make a 10-year plan, let alone a 5-year plan, but if you don’t know that you’ll be where you’re at right now in 5 years, it’s probably best to keep renting, even if it does make sense to buy on paper. No amount of savings and good credit will erase your need to have a firesale if you have to pack up and move quickly.
Are You Ready For a Money Pit?
You’ve probably seen the movie The Money Pit, with Tom Hanks. If not, rent it. It’s a great flick. What you might not realize is that all homes are money pits, really. Furnaces break, roofs sag and leak, and eventually the electrical and plumbing needs to be repaired or replaced.
You have to be ready to set aside 1 to 2 percent of your mortgage payment every month to do repairs. That’s at a minimum. Some homes will require larger, more expensive, repairs.
What About Your Savings?
You need money for a down payment these days. Usually, you’ll have to come up with at least 2 to 3 percent if you’re getting an FHA loan. VA loans don’t require any down payment, but you have to be in the military. Otherwise, for standard mortgages, expect to pay at least 5 percent up to 20 percent down.
What’s Your Credit Look Like?
You need good credit to buy a home – 680 or above for a decent interest rate. No more NINJA loans where you don’t have to prove your income or assets to qualify.
What Can You Really Afford?
Many people get in over their heads because they use an interest-only loan to buy more house than they can actually afford. Or, they buy a home and never account for maintenance costs and other expenses like increased homeowner’s insurance or taxes. Don’t make this mistake. Be conservative. Buy only what you can actually afford.
Can You Get What You Want?
Even if you can buy a home, can you buy a home in the neighborhood you want? What good does it do you to buy a home in a retirement community, for example, if you have children? Sometimes, first-time home buyers get so excited about the buying process that they forget about location, location, location – the location that’s best for them. Don’t make that mistake.
Phillip Waterman’s keen eye for the housing market puts him at the forefront of his field. When not researching trends, he enjoys blogging about the ins and outs of a successful experience of buying and selling.