What You Need To Know About Buying A House
Are you looking for a new home? Buying one is one of the greatest financial decisions you'll make in your life. We’d like to present to you 10 the most important things you need to know about buying a home:
1. Use realtor you trust. It’s not a secret that realtors get a cut of the sales price of a home which makes some buyers hesitant to use a realtor: they believe it drives up the overall cost. Take into account that the seller, not the buyer, pays the commission. Potential buyers should keep in mind that a listing agent (the agent representing the seller) doesn't protect your interests and "that agent would simply pocket both sides of the commission." It purports that you're not saving money. A savvy realtor who works for you can protect your interests and guide you through the buying process - from negotiating a price to navigating home inspections.
2. Don’t forget about a contract. While buying a house, you’ll face with papers to sign. And more papers to sign. A lot of those papers - which are actually contracts - look like "standard" home buying contracts with no room for negotiation. It’s false. Contracts are meant to be negotiated. There is no need to sign a standard agreement. You can waive a radon test or want to make a purchase subject to a mortgage approval, you can make that part of the deal, in case you want more time to review your inspection. That's where a savvy realtor can help.
3. There is no necessity to buy for what you have now. Chances are that buying a house will be one of the bigger financial commitments you'll make in your lifetime.Take into consideration your long-term plans before you agree to buy what you think might be your dream house. It depends on what you’re planning: staying at your current job, getting married, having kids... Due to the market and the terms of your mortgage, you may not actually pay down any real equity for between five and seven years: if you aren't sure that your house will be the house for you in a few years, you may want to keep looking.
4. What about commitment? It’s not about your mortgage. When you get married, the laws of your state generally determine how your assets are treated - and ultimately how they're distributed at divorce. The same rules don't necessarily apply when you're not married. To make it clear, you need to think long term. When you buy a house with your significant other who is not your spouse, make sure you have an exit plan if things don't go the way you hope. It's a good idea to have an agreement in place with respect to titling, mortgage payments and liability, repairs and the like: it's best to get it in writing.
5. Look beyond paint. It's often the case that your dream house has that one room that you're already fantasizing about changing. You have to remember that it's fairly inexpensive to fix cosmetic issues (a bit of paint or some wallpaper) but making changes to kitchens and baths can be expensive. People tend to focus on the cost of cabinets, appliances and counters but sometimes forget about the cost of labor which can double to triple the cost. That doesn't mean that you should give up on a house in need of a significant fix but you should factor in those costs when determining whether you can afford to buy.
6. Buy what you can afford. This can be different from the price that your mortgage company believes that you can afford. Some lenders suggest that you can afford mortgage payments totaling about 1/3 of your gross income but others suggest closer to 28% for housing related costs including mortgage, insurance and taxes. There are a number of factors including your projected income, interest rates, type of mortgage and the market. Ask your mortgage broker to help you understand what's in play.7. Don't be focused on the purchase price. The purchase price is just one piece of owning a house: be sure to consider all of the costs associated with your potential new home. That includes the cost of insurance, homeowner association fees and real estate taxes - depending on where you live, those can quickly add up. And it's not just home improvements that can cost money: maintenance costs dollars, too. It's a good idea to ask questions about upkeep for extras like swimming pools, fancy heating and cooling systems and out buildings. Finally, we suggest that you make sure you're comparing apples to apples: a condo with a large fee that's priced low may be more costly than a higher priced one with lower fees while a cheap home with high taxes may cost you more a month than a more expensive one with lower taxes.
8. Take into account your student loan debt. Following the housing crisis, lending laws tightened. Student debt isn't simply an annoyance: it's treated like real debt. If your student loan is in deferment and you’re planning on buying a home, it’s better to enroll in a properly documented income-based repayment plan so you have the documents your lender will need to properly assess your ongoing liability.
9. Don't be fooled by the home mortgage interest deduction. A lot of taxpayers are tempted to buy more house than they can afford by figuring that they'll save enough with the home mortgage interest deduction to make up for it. The mortgage interest deduction is only deductible if you itemize on your Schedule A: only about 1/3 of taxpayers claim the itemized deduction. You itemize if your deductions exceed the standard deduction: for 2015, the standard deduction rates are $12,600 for married taxpayers filing jointly and $6,300 for individual taxpayers (those rates stay put for 2016). In condition that you do itemize, remember that your out of pocket will still be more than your tax savings. And you can't reckon on the same level of savings forever: mathematically, the longer you own your house, the less you will owe in interest. That's good for building your equity but it means a smaller deduction come tax time.
10. There is no need to buy a house. You’ll find no rule that says you have to buy a house by the time you're 35 - or ever. Buying a home is a great decision and while it can be a sound financial investment, it’s not for everyone. There is a lot to take into account, including the housing market, interest rates, timing and your future plans. You might want more flexibility or mobility, or your career and family plans may be in flux. If you're not sure about a neighborhood, consider renting as a test drive: a realtor can help you with that, too. Even then, you don't have to pull the switch: there are healthy rental markets throughout the country and in some areas, young professionals are choosing rentals over homebuying to preserve cash and remain mobile.