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.