Should I Buy a House? 10 Must-Do’s Before Making a Decision
As millennials age and start to flee urban environments for the suburbs, they are starting to ask themselves the question, “Should I buy a house?” The answer to this is increasingly, yes. However, buying a home is a huge purchase and buyers need to ensure they have all their financial ‘ducks in a row’ before they commit. This guide will lead you through the essential steps of purchasing a home.
1. Establish a Consistent Source of Income
Buyers need to have a steady source of income, preferably for a number of years. So don’t make any huge life changes, such as quitting your job, going back to school or making another large purchase. Ready your financial documents so that you can show your consistent source of income and savings to bank lenders so you can get pre-approved quickly.
2. Check your Credit Score
A high credit score is essential for purchasing a home. Ideally, you want to aim for a credit score in the 700s. This will increase your chances of getting pre-approved for a loan and/or mortgage. A lower credit score can mean that you will have to put more money down for your home up-front. One way to immediately improve your credit score is to improve your debt equity ratio.
3. Get Pre-Approved
Buying a home can be a very long, drawn out process. A way to make the process shorter and simpler is to get pre-approved for your loan before you even start looking at homes. If you and another buyer bid on the same property, sellers are more likely to accept the bid of a buyer who is pre-approved and has shown they have the funds to pay for the home.
4. Make a Checklist of Your “Must-Haves” for Your New Home
What are you looking for in a home? Do you need a house that has a large yard? Or are you willing to sacrifice a yard for a large kitchen? Are you looking for a brand new home? Or something that’s cheaper and more of a fixer upper? List out what’s essential to you before you start looking. It will save you a lot of time in the long run.
5. Is There a Cheap House for Sale in Your Desired Area?
Start by researching the prices in the area you would like to live. What is the range? Determine the top and the bottom ranges of properties in order to determine what you can reasonably expect to spend. A ‘cheap’ home doesn’t necessarily mean a bad home. Saving money and staying within your budget is important. Comb through some of the more economical options and see if they tick off the boxes on your “must-have” checklist.
6. Find a Realtor You Trust
Working with a reputable realtor will give you a leg-up in your search for a home. Some buyers try to go it alone, without a guide. But buying a home is one of the biggest purchases you will ever make and it’s foolish to do it without help. Find a realtor that has good recommendations, maybe even someone your friends or family members have used and can vouch for. Make sure to communicate your budget, ‘must-haves’ and deal-breakers.
7. Start Visiting Properties
Start your search! Make sure you aren’t visiting homes that are out of your price range, or don’t meet the criteria on your “must-have” list. While it’s good to have firm knowledge of the market, you don’t want to burn yourself out by looking at too many homes that you can’t afford or don’t have the features you need for your lifestyle. That can leave you with severe house-hunting burnout. Using a realtor who can help show you homes that meet your criteria is a good idea.
8. Negotiate, Negotiate, Negotiate
So you have found a house you want to buy. Congratulations! If you have been following this guide, you have found a realtor that you trust and you have been pre-approved for your loan. Have your realtor negotiate the price for you. Many sellers will ask for a much higher price than they will accept. Don’t put in a bid at asking price just because you are scared you will lose the house. If you are pre-approved, you are more likely to have your bid accepted over another potential buyer who can’t demonstrate that they have the funds to back-up their bid.
9. Contract with a Reputable Home Inspector
You must have the home inspected prior to purchase. Ask your realtor if they work with any home inspectors that they trust. If they don’t; you can always turn to the American Society of Home Inspectors to look for one. Make sure that the inspector covers all the bases. You need to ensure that the house’s foundation is strong, the electrical system is in good condition, the plumbing and pipes are strong, all renovations on the house are up to code, etc. Also, have the inspector keep his eye open for past water damage, and other catastrophic problems such as mold and roof leaks.