| Quote |
"A good home must be made, not bought."
You can't buy a home, but you can buy a structure to form the shelter for one.
Owning your residence can provide a sense of permanence and commitment. You can make changes to a place that you own which you might not be allowed to make to a rental.
Buying a place to have your home is usually a big event. There are steps you can take in advance to prepare for the time when you'll be ready to buy a structure.
Before you make a big financial commitment to buy a house or condominium, it's usually a good idea to get your finances in order and decide how much you can afford. (See budgeting.) This will help you understand how much you can afford to spend on a your purchase.
Once you've decided about how much you want to spend, use a mortgage calculator to estimate your monthly mortgage. (There are plenty of on-line mortgage calculators you can use for free. Or if you'd like to calculate it yourself, see the link in the reference section.) Add 10% to that amount for things like home repairs and maintenance.
If the monthly amount you calculate is greater than your current housing expenses, start saving the different each month now. This has at least three benefits. First, it helps you confirm that you can afford that amount. Second, you get used to using that amount for housing in your monthly budget. Third, you can use those savings as part of the down payment when you find a house.
If your monthly estimate is less than you spend now on housing, you're probably in a good position to buy.
Think about what factors or considerations are important to you.
- Some potential questions
Gathering: Is it key that it have a big kitchen for the family to cook and gather in together? Will it support the kinds of parties you like to hold? Would you enjoy having friends visit you here?
Neighborhood activity: Is the level of noise in the neighborhood important? Does it have a nice pub or exciting nightlife nearby?
For the children: Where are the schools and what are they like? Are there nearby playgrounds?
Location: How far is it from the places you have to go? From the places you like to go or go regularly?
Accessibility: What about accessibility? For instance, do you have family members or people who might be regular guests who can't climb stairs? Do you have vision or mobility difficulties?
Transportation: Is it convenient to public transit? Is there a place to store your car or park? Is the neighborhood walkable?
Other: Do you have any special storage or workspace needs (for hobbies, etc.)? General condition -- do you have the skills or want to learn them to do your own improvements and repairs, can you afford to pay someone else? Do you want something new or do you like homes with a history or specific style?
Think about what have you liked or disliked about the structures of your previous homes. For more suggestions of things to consider, see features to look for in your next home.
Look around. Begin to get an idea of how much homes or condos in the areas you want tend to cost.
Go back to your list of what you want... you probably can't get everything in one place, ever if you had an unlimited budget, which most of us don't have. So now you need to prioritize and decide what needs to be in the home before you purchase and what you can create after you move. A bathroom can be added, if you have the budget. Flooring can be changed. You can make some changes yourself; you may want to hire professionals for others -- especially changes where safety is a consideration, like electrical wiring. You can usually change the paint color, but it's much harder to change the school system.
Now that you know about what you want and can afford, let's go buy something...
Real estate agentEdit
A real estate agent or realtor is not required, but one can be very helpful. Most of us buy a home only a few times, but an agent has lots of experience. Selecting an agent who understands your needs is critical.
A good real estate agent can help with listings of what's available, with pruning that list down to homes that are good potentials for you. A good agent may also be able to help you find a good home inspector or reputable mortgage company and help you through the process in other ways.
If your agent keeps showing you places that are outside your range or which do not have the features you said you need and doesn't give a satisfactory reason for showing those places, instead of what you asked for, then consider changing agents.
In the US, there are different kinds of real estate agents. Some specialize in residential properties, while others work mostly with "commercial" spaces (offices, stores, factories, warehouses, etc.). Then within the residential agents, there are buyers' agents and sellers' agent. The agents are generally paid out of the commission, that is a percentage of the sale price. If an agent tries to get you to pay them before you buy, be wary.
A mortgage pre-approval confirms that your estimate of how much you can afford is realistic. It also makes you a more attractive prospective buyer and may help to expedite your purchase once you've found what you want to buy.
This is also a good time to check out a couple of different banks, credit unions, or mortgage companies. Do some comparisons of what interest rates they propose and how many mortgage points they require. Select your two or three favorite and when you make your purchase decision, you can go back to those for your final decision.
The closing process can take awhile... It also involves additional expenses. You should have a home inspection, and if problems are found that make require repairs, additional inspections or an adjustment of the price.
Closing includes closing the gap between the listed price and what you are willing to pay. Most home prices are negotiable.
Even if you had a mortgage pre-approval, your actual mortgage needs processing and approval now. (Assuming you don't have the full amount of the purchase, which most of us don't.) Other financing options are also available.
The seller may require time to move out.
Keep in mind that not all closings work out. You may not be able to come to a mutually agreeable price. If the home doesn't pass a certain level of inspection or the buyer's credit is not good enough, the mortgage company may turn down the mortgage. (You can start again with a different mortgage provider, but it will cause delays.) Either the home owner or purchaser may change their mind about moving.
After the closingEdit
And after all that... enjoy your new home!
- setting up
- Is now a good time to buy a home?
- home purchase checklist
- Kirk's blog on Whether to Own or Not
- U.S. Housing and Urban Development's page on buying a home
- HGTV's article on Buying a New Home? Here's What You Need to Know
- Mortgage calculations -- how it works
- Wikipedia's article on amortization calculator