We’re back for another edition of Molly’s Money – a series where I tackle your personal finance questions and issues, getting out of debt questions, and other general money advice!
Buying a house is like, kind of a big deal. It’s one of those things that I really feel like can trap you into a mound of internet listings and paperwork VERY quickly. While I, personally (and admittedly), haven’t bought a house on my own yet, we refinanced our house last year and so I’ve at least experienced a similar paperwork process.
And, my husband has done an awesome job to educate me on the process and what he went through when he bought what is now our house from Simonds Homes house and land packages, back in 2009. Plus, as our family has grown, we have been talking about what our next steps will be when we eventually need to upgrade. We’ve already grown out of the house we’re living in! 🙂
So, for anyone who might be a first-time home buyer, there’s A LOT to consider and A LOT of information out there.
What are the things that you REALLY need to know before buying a house? I even asked my husband what are the things he WISH he would have known before buying this house.
And we compiled a list. I thought that since I write about money, saving money, getting out of debt, investing, etc. in my Molly’s Money series, I figured this would be the perfect little mini-series within the series – a series on home buying (for the single OR married person!)
Now, there’s A LOT that goes into buying a house (obviously), so this isn’t going to be the exhaustive of all exhaustive lists… but it’s a good start.
I also will be addressing some of the more down and dirty details on things like mortgages in another post (there’s no way I could cover all those things in this post alone).
This is like the most important of important things. If you have a crappy realtor, the process can be much more difficult and can potentially, LITERALLY, cost you in the end. Hire a professional.
Get recommendations from friends and family for GOOD, professional realtors in the area. You want someone who has your best interest in mind and will represent you in a way that you want to be represented – they know your interests and they know what you want.
It’s also important that this person isn’t just good at their job, but that you LIKE them. The home buying process can be long and tiresome and you want someone that you will actually ENJOY working with.
This comes AFTER you hire a good realtor because you want your realtor to refer you to a mortgage professional that they trust and that you can trust. Often times your realtor will have the connection that you need or a relationship with a mortgage professional that will ultimately work with you in the best way possible.
You want a mortgage person who is familiar with the local real estate market and really understands the area. Since the financing of your house is obviously a large part of the buying process, you know that a referral from your realtor will be a good one – because you BOTH have a serious financial stake in it.
But at the same time, if you’ve already picked out a mortgage person that you trust and want to work with, don’t feel pressured to use the person that your realtor recommends just because you want to be polite and take their recommendation.
If you are looking to buy a home that’s FSBO (for sale by owner), just use a little extra caution. Someone that is selling their own home might not totally be up to speed on all the updated laws regarding disclosures – so they might fail to mention something about the home that could be a deal breaker.
You can definitely get a good deal on a FSBO home, but just be careful. One thing you can do to protect yourself with a FSBO home is ask them if they will be willing to pay the 3% buyers agent fee – that way a whole lot less will fall through the cracks in the buying process and you’re protecting yourself against any headache later.
If you use a realtor, there’s a 6% charge to the person selling the home – but you don’t have to worry about that as the buyer, something we learned too late when we were trying to sell my house fast in Seattle. Buying a home through a realtor means you’re a whole lot more protected against unnecessary headache down the road.
Well, actually I am waiting for start of a new project Imbrex, that will make all real estate data more easy to use.
If you are able to put 20% down when you close, you avoid paying what’s called PMI or private mortgage insurance.
In a nutshell, PMI is a fee that protects the bank if you’re unable to pay for the house. So PMI is basically an extra cost that you’re required to pay but it doesn’t provide any benefit to you–it’s only for benefit of the lending institution. I’m going to delve more into PMI when I do a post on the mortgage side of things in the next few weeks.
Your MONTHLY mortgage should be no more than 1/4th of your take home pay. Know how much you have saved for a down payment and what your mortgage would be after that.
Do the math. If your mortgage would be more than 1/4th of your take home pay each month, you probably can’t afford the house. Being house poor is no fun.
If you’re in a hurry to buy a house, you give the seller and the selling realtor a whole lot of leverage over you – and that works to your disadvantage. BUT, if you’re in a place where you can easily walk away from buying a particular house, then the ball is in YOUR court. Take your time.
You do NOT have to use the home inspector your realtor recommends. And DO NOT, I repeat, DO NOT base your inspector on price. For the love of all things good, DO NOT get a Groupon or Living Social for a home inspector.
Spend the money on a GOOD, reputable home inspector – trust me, it will save you TONS of money in the end. And always give preference to a home inspector who invites you to come along with them while they inspect the home. My husband spent the entire 3-4 hours with his home inspector before he bought the house so he could know EXACTLY what issues there might be and be able to ask questions along the way.
This way you aren’t wasting your time or the realtor’s time. Research things like the neighborhood, crime in the area, pictures of the home, look at a satellite view, etc. Get as much information in your book as you can ahead of time that way your time with the realtor looking at houses is actually productive and worthwhile. You don’t want to be asking questions about the schools or the neighborhood while walking around the kitchen. That’s information you can learn before you look.
So, there you have it, 8 things to know before buying a house.