The top 10 things you need to know when
buying a home.
1. Don't
buy if you can't stay put.
If you can't commit to remaining in one place for at least a few
years, then owning is probably not for you, at least not yet. With the
transaction costs of buying and selling a home, you may end up losing money if
you sell any sooner - even in a rising market. When prices are falling, it's an
even worse proposition.
2. Start by shoring up your credit.
Since you most likely will need to get a mortgage to buy a house,
you must make sure your credit history is as clean as possible. A few months
before you start house hunting, get copies of your credit report. Make sure the
facts are correct, and fix any problems you discover.
3. Aim for a home you can really afford.
The rule of thumb is that you can buy housing that runs about
two-and-one-half times your annual salary. But you'll do better to use one of
many calculators available online to get a better handle on how your income,
debts, and expenses affect what you can afford.
4. If you can't put down the usual 20 percent, you may still
qualify for a loan.
There are a variety of public and private lenders who, if you
qualify, offer low-interest mortgages that require a small down payment.
5. Buy in a district with good schools.
In most areas, this advice applies even if you don't have
school-age children. Reason: When it comes time to sell, you'll learn that
strong school districts are a top priority for many home buyers, thus helping
to boost property values.
6. Get professional help.
Even though the Internet gives buyers unprecedented access to home
listings, most new buyers (and many more experienced ones) are better off using
a professional agent. Look for an exclusive buyer agent, if possible, who will
have your interests at heart and can help you with strategies during the
bidding process.
7. Choose carefully between points and rate.
When picking a mortgage, you usually have the option of paying
additional points -- a portion of the interest that you pay at closing -- in
exchange for a lower interest rate. If you stay in the house for a long time --
say three to five years or more -- it's usually a better deal to take the
points. The lower interest rate will save you more in the long run.
8. Before house hunting, get pre-approved.
Getting pre-approved will you save yourself the grief of looking
at houses you can't afford and put you in a better position to make a serious
offer when you do find the right house. Not to be confused with pre-qualification,
which is based on a cursory review of your finances, pre-approval from a lender
is based on your actual income, debt and credit history.
9. Do your homework before bidding.
Your opening bid should be based on the sales trend of similar
homes in the neighborhood. So before making it, consider sales of similar homes
in the last three months. If homes have recently sold at 5 percent less than
the asking price, you should make a bid that's about eight to 10 percent lower
than what the seller is asking.
10. Hire a home inspector.
Sure, your lender will require a home appraisal anyway. But that's
just the bank's way of determining whether the house is worth the price you've
agreed to pay. Separately, you should hire your own home inspector, preferably
an engineer with experience in doing home surveys in the area where you are
buying. His or her job will be to point out potential problems that could
require costly repairs down the road.
