6 Tips If Buying A House
Here are some of the things you need to know when buying a house.
Tax credit incentives for buying a home have extended through April 1, 2010. These incentives are encouraging many of us to enter the market. When buying a home there is a money wise sequence to follow. Keep 6 things in mind when buying a house.
1. How Much House Can You Afford?
Find a lender and see how much house you can afford. The lender is going to look and see how much you are making and how much debt you owe. Typically a person's contracted debt (monthly bills plus new monthly mortgage payment) must be only 45% of their monthly gross income to qualify for the home loan. It is a good idea to run the numbers yourself in preparation of meeting with your lender. Do not forget to include homeowners insurance and utilities when figuring your new monthly bills.
2. What Do You Want?
Determine what you want in a house and look at houses in your price range. What is most important? Is it neighborhood, lot location, lot size, number of bedrooms, number of bathrooms, a modern kitchen, a garage? Some people like the style of older homes while others want something that is new. Try not to get emotional and remember that the monthly payments should be considered into the 'worth' of the home. Do not fall in love with a house you cannot afford. If you look at a house above your price range in hopes of haggling the seller down, be prepared to walk away from the deal if the seller does not lower the price enough.
3. Bid on a house.
You have found the house you want to buy. Remember that no property is perfect and some compromise is likely necessary. Now it is time to put a bid on the house. The amount to be bid should be based on the comparisons of similar properties in the area that have sold within the last year to six months. When comparing properties focus on acreage, finished square footage, updates/remodels, rooms, bathrooms and kitchen. Naturally try and find homes similar to the home you are bidding on. The bid should reflect what you believe the property to be worth in light of the comparable properties. This is not a time to be shy. If you believe the home should be sold at 325k instead of 350k than consider bidding lower than 325k in anticipation of price negotiation. If the seller wants to deal they will counteroffer. If the seller does not want to deal then walk away and find another house.
4. Under Contract.
So you agree on a price and you are ready to go under contract. In the contract there will have to be a stated closing date. Often times the closing date is a point of negotiation as one or both parties may have interests affected by the date of closing. For a buyer it is often necessary to close within 30 days of locking in their home loan percentage rate. If 30 days passes the buyer must then shop for a new percentage rate that may or may not be lower. Therefore, the buyer should first consult a lender to lock in the loan rate and determine a closing date. The buyer is then in position to change the closing date. If the seller does not agree with the new closing date than a negotiation may be necessary.
You found a house, agreed on a price with the seller and secured a loan with a percentage rate locked in through the closing date. You are now under contract to buy the house. Do not get to excited yet. The most important and often times most difficult part is next. The inspection phase. Problems that come up in inspection are reasons for a buyer to walk away if an agreement concerning inspection items are not met. As a buyer these inspection costs come out of your pocket so I have arranged the most cost effective sequence to arrange inspection of your possible new house.
The main line connects your home to the city sewer pipe that usually runs underneath the street in front of the home. This pipe should be free of obstructions such as tree roots and free of any breaks. Have a sewer guy check out your main line. This will cost you $150. If there are problems here you may not want the house. A new mainline could cost $10,000. Be sure to get a serviceman that will provide you with a video so that you have evidence for the sellers if there are any problems in the mainline.
After the mainline has been looked at get the inspector in there ASAP. There is usually an objection deadline in the contract which means that the buyer must make all objections prior to this date. Inspectors can have busy schedules so do not waste any time in finding one. The actual inspection should take 3 to 5 hours and cost around $400-$600. Ask your realtor or friends and find an inspector you trust. Remember that you are paying the inspector to tell you what is wrong with the house so find someone thorough. It is all about big ticket items like structure, roof, foundation, plumbing, electrical, furnace, water heater, water damage, mold and asbestos.
If the problems found in inspection are big enough it may be time to renegotiate. Do not accept a knockoff of the already negotiated sale price of the house. Todays lenders will only lend for the sale price of the house. This means that the only extra money you will have to make fixes will have to come out of your own pocket. This is extra money that could be used toward down payment or other improvements you may want to make to the house. Try to get the sellers to fix the problems themselves or give you cash to fix them after sale.
Closing comes and goes and now the house is yours. You followed the 6 tips from determining how much house you could afford through negotiation and inspection. Thanks to the thorough inspection you know more about the worth of your house and the areas that it may need work. Enjoy your home.
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