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Working with an agent |
Why the high drama? Because for many, buying a house is the most important decision a person can make after marriage and children. Albeit a big decision, sometimes the strong desire to own a home precludes many practical decisions about the purchase. First-time homebuyers, in particular, often are guided by emotions when choosing a house, rather than approaching it in a carefully thought out way.
With mortgage interest rates remaining low, knowing what kind of house will suit you; finding a patient, hardworking agent; and gaining a sense of the process may be all you need to unlock the door to your dream home. You can take many practical steps if you want to make an intelligent investment. We asked visitors to the Home and Family Finance Resource Center to tell us what they wish they'd known when buying their homes. Here's what they believe should be top-of-mind for future home buyers.
Do your homework
With a price tag two or three times the average buyer's annual salary, if ever a
purchase demands preparation, it's home buying. Thoroughly research location, school district, deed restrictions, and
taxes using the Internet, real estate representatives, and housing guides. The more information you have, the more you
will understand the issues surrounding the home-buying process.
"You need to educate yourself about what to look for in a home," says Cheryl, of Maryland. "You need to have an idea about what you want in a house and get to know what your options are to improve the house you choose. [Being informed] can make having a house a much better experience."
Affordability
Before you find that oh-so-perfect Cape Cod, begin by determining your buying power.
There are Web sites, including Home and Family Finance Resource Center's calculator
"What Will My Monthly Mortgage Payment Be?"
that can help calculate how much you can afford and what your
approximate monthly payments will be. Remember that mortgage interest rates can vary between lending institutions, so
be sure to
| "I wish I'd hired an inspector instead of trusting the seller about defects." |
Tim, from Texas, and Gina, in North Carolina, wish they'd had a better understanding of PMI expense. Remember, you'll be able to drop PMI once your equity rises.
"When we got into the financing and paperwork we were clear on how much we could afford," says Shelley, of Washington. "... But when we signed the papers, our actual cost was about $120 more per month. We did not realize two key things: You have to pay sales tax on the sticker price of a manufactured home; and we didn't realize that we paid extra to 'buy down' interest rate points. But the biggest shock came about eight months later when we received a bill for property taxes that we assumed were included in our loan."
Hidden agenda
The condition of the house—that of the structural and mechanical systems—is
an important factor in evaluating if it is a good investment. Once you decide on the house you want, make your offer
to purchase contingent on a professional inspection. For a reasonable fee, a home inspection service will evaluate the
major elements of a house and provide you with facts about its physical condition.
Although the law may require sellers to disclose defects that affect the value of the house or property, some unscrupulous sellers will do things such as use paint to cover up defects like ceiling stains, which indicate leaks. Seller warranties vary by state.
Irene, in Oklahoma, writes that she bought a house from a family friend and believed his assurance that the "electricity was fine and all that room needed was a new bulb. I didn't get it checked ... I will in the future."
| "I wish I'd known more about private mortgage insurance." |
Simone, in Florida, says, "My house was built in 1940; I knew the electric probably needed updating, but the inspector did not say anything negative in his report." That cost Simone extra in property insurance premiums, until she upgraded the electrical system. "It almost doubled my previous insurance coverage and cut my premium in half." She wishes she'd allowed enough in her budget for the electrical upgrade before moving in.
The best advice is to work with someone you trust, says Tracy Ashfield, a mortgage consultant to credit unions with Strategic Mortgage Solutions Inc., in Madison, Wis. Don't get inspector recommendations from the realtor (who works for the seller), she adds.
Find your own inspector or ask friends and family for recommendations of inspectors they trust from past experience.
Location, location, location
Finding the right house isn't just a matter of falling in love with a
floor plan. Finding the right neighborhood—which might have a vibrant location and correspondingly vibrant
residents—is just as important, if not more. "As a first time home buyer, I wish I had realized the importance of
checking out your neighbors very carefully," says Timberly, of Ohio. "You may think because your house sits in a nice,
quiet neighborhood, there's nothing to worry about. We were wrong. I wish someone, somewhere had stressed the
importance of talking to people in the neighborhood, of walking around frequently, or other tips to keep people from
getting into a bad situation with neighbors."
By the same token, information about neighborhood crime is free for the asking from most local law enforcement agencies. County residents can find out whether a registered sex offender lives nearby with just a few clicks of the mouse or a simple phone call.
Building new
People looking to remodel their existing home or build a house from scratch can save themselves countless dollars and many headaches by checking the contractor's and builder's backgrounds before hiring them. Many government and private organizations, such as the Better Business Bureau, provide this information.
When checking out the builder's reputation consider such things as how long the company has been in business and how many homes it has built; its reputation with buyers, other homebuilders, and the realty community; warranties offered; and if there's a department dedicated to warranty issues. The best way to check out a builder is to ring doorbells in the development.
| "I wish we'd rolled landscaping expenses into our mortgage; we could have had the work done sooner." |
And remember all the expenses of buying a house, even a new one. Marilyn, in South Carolina, told us her family's new house required considerable landscaping. "This really added to the cost of the home, in addition to the new window coverings, rugs, and so on that (often are) included in a resale home."
Robert, in Massachusetts, agrees and wishes he'd built the expenses into the mortgage. "Over the short haul, we did add some landscaping improvements as our budget allowed. Had we just built this into our mortgage, we could have completed the job sooner and would hardly have noticed the increase in our monthly payments."
Keeping the future in mind
Many homebuyers overlook how a house will function for their family:
Those who like casual entertaining should look for a large kitchen that's open to the family room. Those who enjoy
privacy should go for a master bedroom and bath that are separate from the rest of the living areas. Also keep in mind
the size of your home and the size of your family. Although you may have plenty of room now, the future may include
caring for elderly parents or additional family members.
"We wish that we had planned better as far as the size of the house," says Brad, in Arizona. "[Our house] started out as 1400 [square feet], then 1650, and now 2000. Our youngest daughter's bedroom is way too small and my other daughter's room is perfect. I don't want to play the game of, 'you can have your sister's room when she goes to college.' Buy the size of your future home, if possible. Houses will not get cheaper."
| "I wish we'd done a better job scoping out the neighbors; they make a huge difference in how much we enjoy our house." |
No one ever said purchasing a home was easy, but there are ways to help ensure that unforeseen problems don't crop up. Doing your homework and taking the steps outlined above will minimize the odds of this happening.
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In today's market, working effectively with a real estate agent will help make finding a home a rewarding experience. Home buyers should be well prepared, knowledgeable, and willing to take some simple steps to maximize the productivity of their agent. Remember, while an agent can be a big help, he or she works for the seller, not the buyer. Get preapproved Establish priorities Keep an open mind Homebuying Web sites: |
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