You and your family have worked hard and compromised a lot to save money for your first house. The excitement is justifiable, but some important considerations must be made before zeroing in on any property. Aspects such as budget, location, neighborhood, and tax and financial considerations should be thought out with care, and in a responsible manner. Discussed below are some crucial things that you should keep in mind.
Budget and Mortgage
You need to be very clear about how much you can afford to spend on your house. Be extremely realistic when it comes to setting up your budget and sticking to it, because your loan amount will be calculated on this basis. Avoid the temptation to overshoot it, as this is one of the main reasons for property foreclosures. If you are looking for an unfurnished house, remember to set the budget for your furniture too. If you buy resale property, you may have to set aside some extra money for urgent home renovations. For less urgent repairs, you can go for homeowner loans or home improvement loans.
Once the budget is set, do some research on the different kinds of home loans available. Based on your existing salary, you will get a fair idea about how much you can borrow. The lender, bank, or institution will need details of your total annual earnings, credit history, down payment amount, and closing costs of the house in order to determine how much you are qualified to borrow. Provide them with the appropriate details and do not conceal any facts. Understand the working of your home loan completely, be clear about the amount of interest you will need to pay, the duration of the loan, and the foreclosure particulars. Also ask your loan officer to explain all the tax implications of your loan to you.
If you are buying your second home, you can think of raising the money for it by taking a mortgage on your first home. There are two home mortgage options, fixed rate and adjustable rate. In fixed rate mortgages, you need to pay a fixed rate of interest over the entire term of the loan. In adjustable rate mortgages, the rates are lower for a certain period of time, after which they change according to a prearranged set of rates. There are advantages and disadvantages of both, so talk to your lender before you arrive at a conclusion.
Once you start looking at different properties, keep your down payment ready. You may need to pay a token amount to book it before anyone else does. Do not be tempted to withdraw money from this pool. Also plan for home insurance to cover your property while calculating your budget.
Based on your budget, decide what kind of home you are looking for. You need to choose between a newly constructed house and a resale house. There will be a difference between the prices of both. Additionally, you need to decide if you want a furnished, semi furnished, or unfurnished house. Look for houses which fall within your budget. Don't let the realtor force you into buying something which is outside your price range.
Locality is an important aspect to consider when buying a house. When selecting locations, consider factors such as proximity to shopping centers, hospitals, public transport, and other things that you may find important. If you have children, proximity to schools and colleges is also a relevant factor. Choose a locality according to your budget. The neighborhood is also an important part of your location. It makes a huge impression on children, so choose a safe neighborhood with care.
Locate a good realtor for property buying advice, as he can give you good house buying tips. Make your house specifications clear to him so that he understands what you are looking for. Also mention your preferences about the locality and neighborhood. Make it clear that you don't want to see houses that are out of your price range or budget. This will save you both a lot of time. Realtors have a fair idea about the financial institutions that lend money, but do not get carried away if he tries to sell you an expensive property for higher commissions. Never be in a hurry to agree to the price that he asks for a property; tell him you need some time to think over it. Try to compare it with the other properties in that area.
Once you decide to purchase a house, inspect it minutely, from one corner to the other, before making the counteroffer. Home inspections are crucial in home buying. Look for any building defects like a leakage in the sink, or a door that is badly deteriorated but expertly covered. Also get an expert home inspector to look at the house thoroughly as he can spot the places that need repairing. Inspection is imperative because if you do not inspect the house before buying it, you may end up spending a huge amount of money on repairs. Insist on an inspection even if the Realtor tries to deter you from doing so. Make your counteroffer on the basis of the house inspector's report and prices of other properties in that area.
The Final Plunge
Negotiate the price properly before finalizing the amount payable and drawing up a contract for the same. Ask your lawyer to go through the details. You should also read it carefully, understanding all the terms and conditions and checking for hidden clauses. Once you are satisfied, go ahead and make the purchase. Ask for homeowner insurance quotes from your insurance company once you have bought your property.
While purchasing a house, you may face many problems. There will be important decisions to make. In some cases, you may even have to recalculate your budget. Remember to remain calm, never be tempted, and think thoroughly before making a purchase. It is a huge financial decision that involves your entire family.