There are a lot of factors that go into buying a home. From finding the right location to understanding the costs involved, homeowners must weigh all of these aspects carefully.
Of course, the most important factor is figuring out how much you can afford. Getting pre-approved for a mortgage and understanding the current rates can help you solidify this number.
1. Interest Rates
Homebuying is a huge undertaking and shouldn’t be rushed. It’s important to take your time and make sure you purchase a property that you can afford, according to real estate experts.
Your loan structure and interest rates play an important role in the affordability of your new home. Generally speaking, the larger your down payment and lower your debt-to-income ratio, the better your mortgage rate will be.
Location is also important. You want to be close to amenities like public transportation, schools, shops and hospitals. You should also consider how noisy the neighborhood is and traffic flow.
2. Closing Costs
Buying a home is a big decision, and it’s one that should not be made lightly. Experts recommend saving for a down payment and getting pre-approved for a mortgage before starting the search.
Besides the purchase price of a house, home-buyers must consider closing costs, which are various one-time fees charged by lenders and third parties to process the loan and transfer ownership of the property. Buyers also pay for prepaid expenses, such as property taxes and homeowners’ insurance premiums.
Additionally, buyers must pay for a title examination to make sure that the land is free of ownership disputes or liens.
3. Appraisal
A home appraisal is a key step in the buying process. It confirms the property’s value, and a lender won’t approve a mortgage without one.
The location of the house is another big factor in its valuation. A house that’s located near a busy road, junkyard or power lines is likely to have a lower appraised value than one that’s situated on a quiet street and close to amenities like grocery stores and public transportation.
The house’s condition also plays a role in its appraisal. It’s important to keep it clean and declutter, and a freshly-mowed lawn can boost curb appeal.
4. Inspections
Most homebuyers get a professional home inspection to find out about the condition of the property before they buy it. They may also include an inspection contingency in their contract, which lets them back out of the deal if major problems are found.
For instance, some homebuyers want to make sure the house is free of asbestos. Others are concerned about radon, which can seep into the home and cause lung cancer.
Another consideration is whether the neighborhood has good schools, especially if they have children. Having easy access to public and private schools is important for most buyers.
5. Taxes
Many people dream about backyard barbecues with friends, holiday gatherings with extended family or quiet game nights at home. But before those dreams come to fruition, they must first go through the home buying process.
Property taxes are fees paid to local governments that fund school systems, road upkeep and water/sewer line maintenance among other municipal services. They are a cost that can vary based on where you live and what your house is worth.
Fortunately, Uncle Sam has a few tax tricks up his sleeves that can help you buy a home, save on mortgage-related costs and even sell your home without paying a hefty tax bill.
6. Home Insurance
Purchasing a house is one of the biggest financial decisions you can make. But before you start dreaming about backyard barbecues with friends or family game nights, there are a few key things to consider first.
First, get homeowners insurance quotes. Mortgage lenders usually require home buyers to have homeowners insurance before closing on the house.
Experts recommend a replacement cost policy rather than a cash value policy because it covers the actual cost to rebuild your home and replace your belongings instead of just the current market price or appraised value of the property. Keep in mind that this is different from warranties home coverage which protects you in case an appliance repair pops up.
7. HOA Fees
When you buy a home within an HOA, you’ll pay fees-often monthly-to help cover maintenance costs and neighborhood amenities. Your real estate agent can provide you with a list of fees for each community you’re considering.
HOA fees can increase as the association plans for future projects or impose new restrictions. It’s important to ask questions about the history of fees and discuss whether any plans are put in place.
