How to make your first home-buying experience a success.
You’ve been paying off your debts, watching your credit score rise, and have saved enough to make a down payment. You might even have qualified for a loan. But does that mean you are truly ready to make what might be the largest investment of your life?
Let’s back up a minute and talk analogies. Say you want to buy a pet. The initial monetary outlay to buy a cat or dog is one thing. But the spending doesn’t stop there. You needed to buy accessories, food, and so on. An emergency that requires veterinary care might happen, or you might have to pay to replace the carpet that Fluffy’s been using as a scratching post.
It quickly becomes apparent that there are extra costs beyond the initial purchase — and that’s just to buy a pet. Here are some considerations before you buy a house.
1. Figure out what to spend
Don’t necessarily buy what you can afford. You need to plan for mandatory fees, such as property taxes, homeowners insurance, and homeowner association dues. These fees are not necessarily static; they can go up, and you need to be prepared to pay them. Try to keep your mortgage payments within your means so that you can handle all the extras.
2. Scout out the neighborhood
Choose a neighborhood that matches your lifestyle. If you have kids, pick a house in a good school district. If you want to walk to restaurants and shopping, you typically need to be in the historic part of a neighborhood. Modern amenities a must-have? You might need to live farther from the city center.
3. Understand the art of negotiation
Some sellers might take lower than asking price so make sure that you using strong negotiating skills and be confident in your offer. We recommend you use a professional licensed Realtor when purchasing a new home.
4. Budget for furniture
Unless you’re happy to picnic every night on a blanket spread out on the floor — and with the neighbors watching through your naked windows — you’ll need to buy furniture, and this cost is nothing to sneeze at: real estate professionals estimate it could run you 25 percent of the cost of the home.
5. Look into home warranty plans
Rich Leffler, author of the book Insider Basics for the First-Time Home Buyer!, says buyers should always purchase a home warranty. “It’s like having a bumper-to-bumper warranty on your car.”
Home warranties, which are separate from homeowners insurance and purchased from home warranty companies, usually cost a few hundred dollars annually and cover the heating system, air conditioning, water heater, and appliances. Leffler also recommends that homeowners start putting away $100 a month in a “home fund” as soon as they move in, which they can use to pay for repairs after the warranty runs out.
6. Decide how long you’ll stay
Unless you know you’re buying your dream home, consider the cost of moving. If you don’t stay in the home for at least five years, you probably will not have enough equity built up to cover fees such as closing costs and a home inspection.
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