8 Essentials to Consider Before Buying A Home

February 13, 2015

8 Essentials to Consider Before Buying A Home

How Much House Do You Need?

Consider how much space you need right now. What rooms do you find yourself frequenting? If you prefer having a large kitchen in exchange for a smaller office space, make that a priority from the get-go. Also take into account your lifestyle. A homeowner who keeps mainly to herself will need less space than one who has a large family, naturally. Everyone has certain non-negotiable needs, and the structure of a home should satisfy those needs.

open-floor-plan

The prevailing trend in recent years has been a two-step home purchase, allowing for a transition period from a starter home into somewhere with amenities more suitable for a family. This process is often expensive, and thoughtful consideration when it comes to your first home purchase can ensure a lifetime of potential without the hassle of upgrading.

How large of a family do you expect to have in the future? Should each child have his or her own bedroom, or would you like for them to share? Is there a chance you’ll be the primary caretaker for your parent or your partner’s parent eventually? We know that it’s difficult to think so big picture, but by anticipating major life changes and building in a little wiggle room, you may be able to save yourself the trouble of changing homes later in life.

Negotiations

Maneuvering your way through a deal with a seller can sometimes be tricky. First of all, always filter your conversation with the seller through your real estate agent. Legal documents can be dense, and the consequences of seemingly unimportant changes to your agreement can end up being costly. You’ve already enlisted an agent, so it makes sense to take advantage of his or her knowledge in your negotiations.

On another note, anytime you receive a counter-offer, it’s always best to respond as quickly as possible. Delays in your response only give other buyers the opportunity to swoop in and initiate a bidding war, which will inevitably result in a higher price for the home. Even if other buyers haven’t placed a bid, if a seller catches wind of the presence of other serious potential buyers, you may see an increase in the price of the home.

group-negotiations

When you’re preparing to submit your counter-offer, review with your real estate agent and make sure their plans for the presentation are on track with your bottom lines. Your agent is the liaison between you and the seller, so you want to make sure that what they know where you’re willing to be flexible, and what your non-negotiable terms are.

Before you make a final decision, have your mortgage broker estimate your future property taxes and home insurance cost. It’s always good practice to do a final check on the exact annual and monthly obligations you will take on when your offer is accepted. Running the numbers before your final offer will show you how much of an impact a $2,000 or $10,000 variation in purchase price will have on your future payments, allowing you to make a more funny informed decision.

The Value of Your Future Home

When you’re finally ready to close the deal on your new home, one of the first steps you’ll need to take is to get an appraisal. This is an unbiased professional opinion of the home’s value, and it’s conducted by a licensed or certified appraiser of similar properties in the area.

Once appraised, your home will be assigned an appraisal value, which directly affects the amount a financial institution is willing to loan to you. If the appraisal ends up being lower than the contract price, it can serve as a negotiating tool and help you convince the seller to lower the price.

A property’s appraised value is influenced both by recent sales of similar properties and current market trends. The appraiser must conduct a complete visual inspection of the interior and exterior of the home, noting any conditions that detract from a property’s value (e.g., necessary repairs).

The ABCs: Affordable, Built Well, Comfortable

While cost is often a buyer’s main concern, there are several other considerations you should keep in mind before you make a final decision. Most homes nowadays are built with either stucco or brick. The debate over which is better (or what “better” even means) is still unclear, but brick has been shown to require less maintenance than synthetic stucco over time. And while brick may cost more upfront, the maintenance savings you’ll reap typically pay for those additional upfront costs within 5 years of owning your home. Add to this the average 6% increase in resale value on your home, and it makes sense to plan for the long run with a brick home.

bricks

Comfort is more subjective, but it’s something that you should consider when you’re buying a home. Does it fit your lifestyle? Does it work with the furnishings you already have? Are there any flaws that you can foresee causing frustrations in the future?

Insulation is a factor that’s often overlooked when it comes to deciding on a new home. Poor insulation not only drives up your heating and cooling expenses, but it can make parts of your home much more uncomfortable in the event of extreme weather and temperatures.

Your New Neighborhood

Knowing where the best school districts are located, where crime rates are the lowest, and which areas are generally the most desirable will both affect your quality of life and help maximize the resale value of your new home.

Do some research through online searches, and make comparisons based on cities, school districts, and property values. View crime statistics for your new city online, and read local newspapers to determine which neighborhoods are preferable.

Drive around and talk with local residents to get to know the culture of the town. If you have children, bring them for school visits to meet with the principals and teachers. Test out the public transportation system if getting around easily is a concern. Proactive thinking will make the transition into a new area much smoother.

Special Loan Programs for First-Time Homebuyers

First-time homebuyer loans can offer you a low down payment, limited fees, and reduced interest. These loans are offered by the US Federal Housing Administration (FHA) and by the vast majority of states. A first time homebuyer is defined as a person who has not owned a home for three years, including single parents who previously owned a house with a spouse.

Full documentation and a minimum credit score of 580 are required in order to be approved for a FHA loan.

new-home-buyers

These loans are a good option if you don’t have enough money saved up for a large down payment, if you’ve demonstrated the ability to meet high interest payments and fees, or if your credit score is not high enough to qualify for other types of loans. However, FHA loans have higher mortgage insurance requirements than conventional loans and the home you are purchasing must be your primary place of residence. This stipulation means you won’t be able to rent your home to outside parties.

Home Insurance

The physical characteristics of the home—e.g., the size, location, construction methods, and condition—will affect the cost and selection of home insurance available to you. For example, a home located near a highly-rated, permanently staffed fire department will cost less to insure. Older homes and homes that are near the coastline, on the other hand, will increase your insurance costs. Be sure to ask for a Comprehensive Loss Underwriting Exchange (C.L.U.E.) report from Choicepoint or an A-PLUS report from ISO. Both of these services will have records of insurance claims on the house, so you can determine whether past problems have occurred and whether any resulting damage was properly repaired.

old-attic

When purchasing a home insurance policy, it’s also important to work with your insurance agent to get enough coverage to rebuild the house completely in the event of a total loss. Additional coverage in the form of liability insurance will protect your financial assets. Take the highest deductible you can afford to save money, seeing as most people only file a claim every 8 to 10 years.

Discounts are readily available for combined policies and preventative measures such as smoke detectors, sprinkler systems, alarm systems, upgraded heating or electrical systems, and wind-resistant shutters.

Full Disclosure and Home Inspection

A disclosure is given to the buyer by the seller to document their knowledge of the property. This will not constitute the same information as an inspection because an inspection may bring many issues to light that were previously unknown to the seller.

In preparation for your full disclosure, research the disclosure laws of your particular state. Some states require more disclosure than others when a house is on the market. Review the seller’s disclosure forms for major issues, such as a leaky roof, damage to the foundation, or mold in the house.

We’re passionate about helping our customers, so whether you’re in the process of buying your first home or making the transition to a new one, we encourage you to contact us for a consultation with one of our certified industry experts. We’re always within reach, so don’t hesitate—call us or request a quote today.

Request a Quote