Buying a house can be very exciting. There are many benefits to owning a home including privacy, a sense of true ownership, and over time, financial benefits. However, buying a house can also be a giant headache, a load of work, and an overall money pit if one jumps in unprepared. So, before jumping headlong into the buying process, here are a couple of quick things to consider before buying a house.
Are you financially prepared to buy a house?
Before you even look at a picture or layout of a house, you must first consider if you are financially prepared to buy a home. There is more to it than just determining if a monthly mortgage payment can be covered by your take-home pay. One must resist the urge to buy right now and rationally think if buying a home makes sense.
When buying a home, there are many other potential expenses than just the downpayment such as closing costs, repairs, and moving expenses. Closing costs cover a myriad of items at the closing of buying a house and can range from two to five percent of the value of the house. Moving expenses can add up as well when considering a van and hired help. Repairs or immediate improvements to a newly bought house can also add up – more on this later. Regardless, of the extra costs involved, it is a good idea to have more than your downpayment to give you a buffer if something else were to pop up – a full “rainy day” or “emergency” fund can be that buffer.
Have you considered extra help when buying a house?
When thinking of buying a house – especially for the first time – extra help can make the process much easier. By extra help, I am talking about getting a realtor, and inspector. A good realtor can put a lot of legwork in for you. They know the areas and can help you find a good price on a home. They will also handle most of the documents and communications for you. Plus, if you are buying, the seller is who will pay their fee. Some may argue you can get a better price buying on your own, but for first-time buyers, you may miss a lot. Just make sure the realtor is someone you are comfortable with. A pushy realtor can make the buying process more stressful than it should be.
An inspector can also be of huge help. I would recommend getting an inspection done on any house you intended to buy and make contingent offers based on their inspection. An inspector has the training and experience to find issues that you are simply not aware of. A good one will make you aware of the crucial issues and give you firepower at the negotiation table to request repairs or a lower overall price. A $500 inspection is much cheaper than buying a home with tens of thousands in repairs.
What do I actually need in my house, and what do I want in my house
Every individual has their dream home with their specific wants and needs. Some individuals have very particular lists. My suggestion, especially if this is your first home, is to understand that no house is perfect. And understanding what you need in a house, and what you want in a house can save you thousands of dollars if you are willing to compromise on some of the needs.
Here is an example list of things you may need in a house:
- Three bedrooms
- Two bathrooms
- A kitchen with at least 10 cabinets
Here is an example list of things you may want:
- A pool
- A garbage disposal
- A fireplace
The difference between the two is the need list is non-negotiable and the want list is gravy on top. Also, wants can generally be added after the fact, such as a pool. Needs, on the other hand, are generally much harder and expensive to add after the fact, such as a new bathroom or bedroom.
For my wife and I, a couple of the needs we had were in our budget, a two car garage, three bedrooms, two bathrooms, a safe neighborhood and a kitchen big enough for a family of four. Some of our wants included a fireplace, quarter acre lot, a basement, and twenty minutes or less commute to work. We did not find a house with all our wants, but we found one that matched our needs. We also got it at a good price, in a good neighborhood. However, if we had required all our wants to be met, we may still be looking for a house or have grossly overpaid for our first house.
How long are you going to stay in this house?
This one catches many off guard at first. But the logic is simple. If you are planning on moving in the next few years, buying a house that matches your “forever home” list is a waste. Now I am not telling you to not find the best home for you, but paying a premium on a home that you plan to move out of in the next few years can put you in a financial bind with little return. Also, consider how easy it will be to sell your house. If you do plan on moving in the next few years, a house in a desirable location may be worth paying a little extra money just for the increased chance of selling it in the next few years.
If, however, you do plan on staying in the home for a long time, consider the age of the house and what repairs that might be needed in the next few years. An older house that needs a lot of work can be a money pit and can turn your home into a burden instead of the joy it should be. Also consider the amenities and location a little more. If this home is the one you plan to stay in for a longer period of time, make sure it will meet the changes life may bring for you.
What items will need to be fixed in the next few years?
Remember when I mentioned there are other costs when buying a house outside of a downpayment? This is where a lot of those costs can come from. There are items in a house that can cost thousands of dollars to fix, and by simply checking the age of some of these items can give you a hint at what you may be paying for in the next few years.
Here is a list of some of those items:
- The roof
- AC unit
- Furnace
- Water heater
- Dishwasher
- Flooring
Each of these items can be hundreds if not thousands to replace. If anyone of them are ten to twenty years old, then they could be needing replacement in the next few years. Also, an inspection can reveal other issues, such as foundation or water damage. Realize that any issue in the house that is not fixed before the paperwork is signed turns into an issue you will have to fix. Every house will require maintenance and/or repairs to some degree, but taking the time to vet out bigger issues can save you thousands of dollars and massive headaches.
Buying a house – even your first one – can be a great experience, and owning a home can open you up to many freeing possibilities. By considering these questions before buying a house, you can make the process less stressful and more financially feasible. Not all houses are created equal, and not all deals are as good as they seem. But by taking a couple of minutes to consider these questions you can find the right home, at the right price for you.
Quote of the day: The thrill of coming home has never changed. – Guy Pearce
