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6 Steps to Buying a New Home

Jul 20, 2018 3 min Read

Key Takeaways

  • Base your budget on today, not tomorrow.
  • Forget your mother — listen to your inspector.
  • The sunny side of the house could darken your expenses.

 

Whether you’ve found the perfect house with a white picket fence in the suburbs, or a modern condo with all the amenities in the city, there are a few things to consider before you take the big step to homeownership.

 

 

Being blinded by excitement and emotion or getting caught up with the fear of losing out on your dream home is common, but rest assured that the perfect house for you will be the one that best fits your needs. If you’ve found one that seems right, don’t sign that offer letter until you’ve considered these steps first.

 

 

 

Step 1: Back to basics: double-check your budget

By the time you’ve reached the ready-to-make-an-offer stage, your budget should be firmly established. But with 26% of American homeowners spending more than the recommended 30% of their income on housing payments, it’s worth re-checking.

Go back and review your finances to make sure that the home you’ve fallen in love with falls within (or preferably below) your set budget. Remember, too, that you’ll need enough money to cover closing costs and other fees, which can average between 2-5% of the purchase price.  

Don’t try and justify a home price with what your future income might look like, either. If you can’t comfortably afford it now, it’s time to reevaluate your budget and start looking for homes at a lower price point. Otherwise you may end up being “house poor”, which means spending so much of your income on house expenses that you’re left with very little leftover. But, if you feel confident after running the numbers and can comfortably pay your bills, fund your 401(k) and cover all of your other obligations while making the house payments, then get excited to make an offer!

 

Step 2: Do your homework

Put your research skills to good use by doing a deep dive into a house and neighborhood’s past.

  • Compare and contrast recent property sales - Your realtor can help you here, but you can also research what has recently sold in the area by using websites like Zillow or Trulia. Plug in the property address, and start uncovering the real estate activity in the neighborhood
  • Read up on local schools - Realtors cannot help you here, as they are legally unable to release school rating information. Fortunately sites like GreatSchools can help you compare information about schools in various locations.
  • If these walls could talk - Want to know when a home was built, how many times it was sold, any permits for construction, and the historical property tax rates? This is all public information and can be found from going to the town’s municipal center and pulling the house’s records.  Alternatively, a Google search for the county’s property tax appraisal site can give you a wealth of information about a specific house.

Ask around:  If you know anyone in the area, make inquiries. Ask about the school, the neighborhood, the general feeling of the town that the house is in. It’s always good to get a sense of a place from the people who live there.

 

Step 3: Drive around...again

Your work commute is likely your most frequent trip from home, so make sure it’s an easy one. Sure, your new home might be five miles from the office, but that means little if you commute with the masses and end up sitting in terrible traffic every day. Take a morning drive from the home to your office at the time of your commute. Also, drive around the neighborhood at night, in the middle of the day, and on weekends, and make sure the neighborhood looks the way you want it to at all times. You may find, for example, that your neighborhood is bustling during the week but becomes a ghost town on Saturday and Sunday.

 

Step 4: Listen to your inspector

Even if your heart is set on a home and in your mind you’ve already picked out décor for each room, do not disregard the house inspection. Turning a deaf ear to your mother’s opinion on the lack of a finished basement is one thing, but listen up when it comes to what the inspector has to say - their report is an insider’s look at the innermost details of the home (and could reveal many hidden secrets that make the house less desirable).

Pay particular attention if the home has any of these costly issues:

Paying close attention to the inspection could save you a bundle, whether that means leveraging the repairs to negotiate a better price with the seller or deciding it’s better to continue the search for another home.

  • Foundation Issues - If the floors seem unlevel, doors with gaps at the top, and misshapen windows are signs of foundation movement. Overtime this could lead water to seep into the house, causing unseen damage. Costs to repair a foundation could start at $12k and up.
  • Old Wiring - A house outfitted with knob and tube wiring and/or porcelain fuses is not only a fire hazard but will make it difficult (if not impossible) to get homeowner’s insurance - rewiring a house and updating its electrical system can range from $4-20k.
  • Signs of water damage - Water can be enemy #1 for a house and can indicate the growth of mold or rot. Ensuring a house is properly insulated should be a top priority.
  • Plumbing Issues - Old pipes that leak and crack can be a big drain on a maintenance budget, potentially costing up to $5,000+ for a complete re-do.
  • Old Roof - Whether it needs resurfacing, re-tiling or re-roofing, roof repairs will likely be a costly (but necessary) fix- up to $13,000+ for tile roofs.
  • Exterior Issues - Rotten weatherboards or peeling paint are not only unattractive, they may be indicators of a poorly-maintained house, which means potentially costly repairs. Weatherboards are $300+ and exterior paint overhauls can cost between $10-30,000.

 

Step 5: Consider the bills

Has your dad asked on which side of the new home the sun sets? If you looked at him like he was crazy, you may owe him an apology.

This information is important, as it could greatly impact your heating and cooling bills, as well as indicate a need for blackout curtains if the sun is hitting the master bedroom at 6am. Be sure, too, to ask your realtor for information on average water, gas and electric bills for the home. The seller may willingly provide the information to your realtor, but don’t waste your time calling the utility providers — most electric and gas companies are prohibited from sharing the information with a 3rd party (which you are until you buy the home). Also, if a particular cable or internet provider is a must for your household, make sure that provider services the area where your home is.


Step 6: Sleep on it

Buying a home can be an exhilarating and terrifying experience. It’s likely the biggest single purchase you’ll make in your life and a huge financial decision. It’s okay to be nervous but if you have concerns or are seriously wavering on a property, take a step back and think about whether this is something you really want to do.

 

What you can do next

Purchasing a home is a huge decision that will affect your finances for years to come. Take time to make an educated choice so that the keys will unlock the place of your dreams, not the money pit of your nightmares.

 

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