Other than marriage, homeownership is the longest contract you will ever enter into. With a 25-to-30 year commitment on the line, buying a home can be a confusing, even overwhelming, experience. But with even the most basic knowledge and a little planning, you can navigate the process with confidence.
With that in mind, here are three key steps to help you plan ahead, ask the right questions, and prepare for the future, so you can live happily ever after in your new home.
- Plan ahead and prequalify for a mortgage loan.
- Credit scores matter. With a credit score you can qualify for better rates and less of a down payment. Review your credit report to make sure it is accurate and understand the FICO scores needed to get a loan. Don’t try to finance any other major purchases—a car, boat, or other luxury item—when you are getting ready to apply for a mortgage.
- Be preapproved before you go out to look for a house. It’s better to know that you can afford--and get approved for--the type of home you are looking at.
- With the right information, your lender should be able to give you an idea of the financing you can expect. When you go to talk to your financial institution, bring background financial information (paystub, retirement accounts, consumer debt, annual income). Remember, your home needs to fit into the budget you have. Not the budget you wish you had.
- Have a clear understanding of the terms of your mortgage loan. Invest the money for a lawyer to review and explain it to you – or use a reliable real estate agent. Stick with companies with long histories of providing loans. Be suspicious of companies that are not licensed or offer too-good-to-be-true financing.
- Know what you are buying. Follow your head, not your heart.
- Make your first house “date” a double date. Take someone you trust with you, a parent or friend, someone who is not emotionally attached to purchase of the house. They will see things that you do not notice.
- Trust your real estate agent. Communicate clearly about things that are most important to you in a home. Your real estate agent is the matchmaker who will help you find a house you can commit to.
- Do your “homework”: Ask what kinds of maintenance and repairs have been done in the house. If in a housing association, find out if there have been any new assessments, ask about litigation in the development where you are looking.
- Sleep on it, and schedule a second walk through. You will see things differently after talking them through with your trusted advisors.
- Listen to the inspector you hire to assess the house. The seller has an obligation to disclose any defects or concerns, but that does not mean they always will.
- Don’t set yourself up for buyer’s remorse. Your contract will have a 3-10 day back-out period. Use it wisely. Get that home inspector in to evaluate from roofline to basement. If something seems off, walk away. There will always be other homes out there.
- Plan for the future.
- If this is the house of a lifetime, you will be there for many, many years. Learn what you can about the neighbors. Find out about neighborhood services, schools, recreation and conveniences.
- That said, take a moment to consider how long you really plan to live in the house. Will you outgrow it? Decide to downsize? If so, who might want this home 5 or 10 years from now. Ask yourself if you are making a good investment? Will you be able to make money if you decide to sell sooner rather than later?