Here are 12 critical things to consider before purchasing a house to help ensure your process goes smoothly.
1. Your Debt-to-Income Ratio
You will most likely take out a mortgage loan to pay for your house. Lenders use what is known as a debt-to-income ratio as part of the qualification process. Add your monthly debt expenses and divide them by your income to calculate your ratio. The percentage helps lenders predict how well you can manage your finances, and it’s best to have below 43% to secure a loan.
Before buying a house, figure out your debt-to-income ratio and make sure you don’t overextend yourself. Choose a property where you feel confident you can afford to pay back the mortgage and develop a payment plan ahead of time. Keep in mind lenders may tell you one thing, but it’s essential to trust your gut.
2. How Long You Will Stay in the House
When buying a home, you want to consider your long-term plans. How long do you want to live in the house? If only staying for a few years, it may be more economically beneficial to rent.
It takes around five years for a house to appreciate enough value to balance out the initial costs. Consider your job and current lifestyle to determine how long you’re likely to stay put. If you know you’ll have to relocate for work in the future, hold off on making a purchase.
3. Your Current Employment Status
Job security is something on many people’s minds as our economy recovers from the pandemic. Having a stable job is crucial to affording your mortgage. Lenders will also ask to see records of your employment status, ensuring you can pay back the loans. Conventional and FHA loans will require at least two years of work history.
4. Your Down Payment
A down payment is one of the most critical aspects of buying a home. It is the money you pay upfront as part of the purchase. Most homeowners offer a 20% down payment, but a larger
installment can lead to lower interest rates and monthly costs. However, you want to stick within your budget.
Before buying a home, make sure you have this money saved up. Downsizing or cutting back on takeout can help set aside some extra cash. The advantage of having a substantial down payment does help if there are any appraisal issues. Many sellers will take this into consideration, especially when there is a bidding war.
5. If You’re Emotionally Ready
Purchasing a property is a big responsibility. It comes with additional maintenance, which renters may not be used to. For example, it is your job to fix any broken appliances. Before making a decision, consider if you’re emotionally ready for the commitment. If you still want to travel or explore other career options, you may want to wait to buy a house.
6. The Appeal of the Neighborhood
Besides the interior features of the residence, consider if you like the neighborhood. Take a walk around the block during the open house. Pay attention to the type of people and the conditions of the other homes, and look for well-maintained properties and proximity to essential amenities. Also, research the crime rate and median home prices. This will be part of searching the property history.
Be sure to explore the surrounding area, too. Make sure you have an easy commute to work and check out the local schools. If you don’t feel comfortable with the neighborhood, then you may want to reconsider.
7. The Condition of the Appliances
Home appliances are critical to the everyday function of the home and can be expensive to replace. Check the condition of these items when touring the house. Older devices may require more upkeep or need to be replaced. A refrigerator will usually last about 13 years.
Also, look for energy-efficient appliances, which save you money on your utility bills. Remember to ask if they will be there after buying the property.
8. Expectations of Your Homeowner’s Association (HOA)
An HOA is an organization that makes the rules for some properties and their residences. They also often require you to pay a fee for the upkeep of communal areas. Community members usually run an HOA.
Read the requirements carefully before signing an agreement. Understand what the fees will cover and any restrictions for upgrading your house. For example, you may not be allowed to have a fence above 8 feet tall.
9. Any Issues Found in the Home Inspection
Getting a home inspection before purchasing a property is key. These examinations can uncover structural issues, such as foundation problems or roof damage. They can even find hidden pests. Any damage to wooden structures is a key sign you may have a termite problem. You must get the results of the home inspection before moving forward.
If there are problems, you can ask the seller to fix them before buying the house. Keep in mind waving the home inspection can lead to costly repairs in the future.
10. Other Factors Besides the Purchase Price
The purchase price is one of many other aspects, such as homeowners insurance costs. The average home insurance price is around $1,015 per year. Keep in mind that there are multiple types of insurance options, such as HO-I policies. You also need to account for maintenance costs, such as your heating system. A good rule is to set aside 1% of your home purchase price for the repair and replacement costs.
Besides everyday expenses, you might also want to consider costs for remodeling projects. For example, you may want to update certain areas, such as kitchens or bathrooms.
11. The Size of the Home
The size of your home can impact its functionality and comfort. If you have a larger family, look for a house with more square footage. Also, consider the size of the yard. If you enjoy entertaining or have small children, a larger space may be more desirable. Be sure to also consider the lot’s shape, which can impact privacy.
12. How Many Bedrooms It Has
The number of bedrooms a home has is an important selling point for many homeowners. If you often have overnight guests, then you want to have a spare room. Consider your long-term needs as well. If you plan on extending your family, look for a house with multiple bedrooms.
Think These Things Through
Buying a home is an exciting milestone. However, it’s a big decision that requires a lot of thought and planning. Ease your mind by doing your homework before making any major decisions.
About the author: The above article on what to look for before buying a house was written by Rose Morrison. Rose is a home improvement and real estate writer. She is also the managing editor of Renovated.