Wednesday, February 19, 2014

Preparing Yourself for Home Ownership


Buying a home is, for just about everyone this side of billionaires, the biggest investment they’ll make in their lifetime. You’ve probably heard that before. In fact, you might be sick of it. In point of fact, I’m sick of it. Sure it’s a big investment. Lots of money, but let’s face it, you’ll get over the stress before long and settle into life in your new home the same way the rest of us do. You’ll stress more about how often the neighbor trims his lawn than you do about making your mortgage payment. You might even set your payments on automatic withdrawal from your bank account and never give them another thought again. So, if it’s not that big a deal after you’ve bought the house, when is it a big deal?

The most important period of time with regards to making a home purchase is that year to two years (up to about five years) before you actually lay pen to paper and sign the purchase contract. What you do leading up to the purchase of that home will determine whether the purchase goes smoothly, whether you can purchase the house at all, what region you will live in, how much you’ll spend, and how much you’ll get bilked in terms of expenses and fees. 

First off, during this period of time, don’t put your trust in the hands of a realtor. Think of them as used car salesmen of the housing market while you’re getting yourself ready to buy. After all, they don’t want to spend the next two years coaxing you into a sale. They want to sell quick and then move on to the next. Can you blame them? They earn their livings that way, so to save yourself some stress and them some time, take a little time to size up your personal needs and wants, and then get to the realtor later. They’ll be more helpful when you have more specific goals in mind anyway!

Obviously, and this topic has been repeated ad nauseam everywhere online, you need to get a handle on your credit situation. Make sure any bankruptcies and liens are taken care of. Get your credit cards paid off, and get those student loans paid off! Mortgage companies make a careful appraisal of your ability to pay based on your credit history, so keep in mind that for every late payment, skipped payment, defaulted loan, or other negative impact credit report, you’re going to have to pony up thousands, if not tens of thousands of dollars over the life of your mortgage. Get a credit report, and get stuff paid off!

Secondly, you need to start putting money away for the down payment. Even if somehow you were to be approved for 100% financing, you might find it extremely helpful to have a few thousand dollars saved up to cover moving expenses and incidentals that might catch you off guard after you buy. It isn’t unheard of to have a new homeowner find stains on carpets that they didn’t see, and decide that the house needs a new floor or roof relatively soon. 

With your down payment and credit ready to go, take you time to decide what KIND of house you want. For instance, do you like Tudor style? Craftsman? Federal? These are important questions to ask, and will help to determine what kind of layout the house will have, as well as how it will be decorated. You’d be surprised how expensive it can be making an ugly row house look pretty, particularly if you love the colonial look. Choosing a style you like and sticking to it can save you money when you are ready to buy!

Finally, don’t negate the importance of finding a good neighborhood to live in. It may be tempting to jump at the first house you come across in your price range, but you’ll be better off if you spend some time working out where you want to live and setting your goals in that direction. Don’t buy a house in the middle of nowhere if you don’t like to commute to work, and by the same token, don’t buy a house in the city if you can’t stand noise. You might have to carefully reconsider your options, but in the long run, you’ll be doing yourself a favor to let your realtor know (when the time comes to contact them) that you’ve found the area you want to live in, and you’re willing to wait for the right house to come on the market if necessary!

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