5 Questions to Ask Before Buying a Home
If only buying a home was as easy as finding the perfect house, signing a piece of paper or two, and scheduling the movers to haul your belongings into your new abode!
But buying a home is a complex process that requires a good deal of planning, research, and patience.
Here are 5 questions to ask yourself before you decide to buy a home:
If you're moving into your first house after having lived in an apartment or other type of housing, you will need to figure out just how much home you'll need. Single-family home? Condo? Multi-family complex? Make sure the space you're thinking about will meet your current needs, as well as future needs if you plan to remain in the home for 3, 5, or 10 years.
In addition, the true costs of home ownership should be taken into consideration. A huge lawn, larger rooms, and walls that resemble a blank canvas are an exciting part of purchasing a home. They can also mean having to buy a lawn mower (or hiring a lawn service if you can't get around to cutting the grass), larger electric bills to cool your bigger space, and home decorating costs. The size of your mortgage payment is just the beginning, so factor in all of your additional costs when determining your home ownership needs.
Outside of driving through a neighborhood, have you researched the area for the amenities you need? Depending on your situation, you may be interested in the ratings of local schools, the cost of yearly property taxes, if construction is forecast for the area, transportation and entertainment needs, and more.
Home prices go up and down based on market conditions, but there's typically always room for negotiating. Be prepared for the negotiating process by having a professional home inspector evaluate the home, and know how much other area homes cost buyers in the recent months to help determine the appropriate market price.
You will need to figure out how you're going to get the financing you need to purchase your home. The best thing to do is to secure this financing before you find your desired home. Get pre-approved before you start house hunting, and it will make the process easier.
Also evaluate what you have available for your mortgage down payment. The traditional "20 percent down" is not a requirement for buying a home, and there are plenty of options, that allow a low down payment.
There are plenty of financing options available to you. And unless you've won the lottery, most everyone will have to choose from one of the following:
Sometimes a private individual, the home's seller, or an investor can provide a mortgage directly. Depending on your relationship with the private financier, your interest rate could vary from below current market rates to one significantly above the prime rate. A private mortgage can still be bought and sold, so if the investor decides to sell the mortgage at a later date, you will be serviced by a different person or company.
Mortgage lenders are financial institutions (including credit unions) that lend money to people so they can purchase a home. Lenders manage the review of an applicant's application, credit and financial review, and typically provide guidance throughout the process up until – and sometimes beyond – the closing process. Lenders typically have a wide variety of loans to choose from, which allows them to find a match for most people looking for a loan. Always get a clear description of the small print, including the rates, fees, and taxes. Banks typically will offer a low interest rate, but charge large fees and taxes (some to look out for include origination fees and intangible taxes) that will increase your overall payment. Credit Unions typically have low interest rates and don't charge the extra fees and penalties associated with a bank.
A mortgage broker has access to a large selection of loans from multiple lenders. They search through the available loans and programs and recommend one for their client. Mortgage brokers make money by adding commission to each loan. They provide the loan at a slightly higher interest rate and then sell the mortgage to another lender for a profit. In most cases, it is better to go directly to a lender you trust to avoid these extra charges.
The sheer work of purchasing a home – even if you've done it before! – can be more than a little intimidating. There are resources that can make the whole process easier.
You may want to consider using a REALTOR® who has access to information about homes, neighborhoods, and even reputable lenders.
You may also want to meet with or hire a Real Estate Attorney who can help you avoid mistakes through the process that may results in issues down the line.
You should also speak with one of SCCU'sMortgage Representatives, who can help you answer all of the questions above. Our Representatives will be able to help you determine your home ownership needs and amount you can afford, and get you into a mortgage program that suits your situation.
Buying a home is exciting! But it can also be intimidating. Make sure you reach out, do your research, and really answer these questions honestly to end up in the best home and mortgage for your lifestyle.