Home ownership is not for everyone, but for those who feel like it’s the right time to buy that certain house, there are a few things you need to know to be sure you’re making the right decision. If you’re still renting, file this away for reading later—it’ll help you if you ever decide that home ownership is right for you.
Now let’s see what steps you need to take before you buy a home. (For related reading, see: What Are My Risks of Buying a House?)
Do Your Research
- Get financing in order even before you start looking at specific houses. This seems backwards compared to how most people do it, but you should know how much you can realistically afford (~ 25% of your income is an often-cited number) before you start house hunting. Go talk to your financial advisor (have you saved enough for a down payment?) and then see a mortgage lender first to get your ducks in a row—you’ll be glad that you did.
- Know what’s important to you in the area you’re considering buying. You want to live in the best school district (if you have or will have kids), or need to know what the crime levels are. How about the property taxes? Do your homework on the makeup of the neighborhoods you’re considering; there are plenty of statistics out there, and qualified realtors who can provide these types of answers to you as well.
- Make sure you get everything in writing on the house prior to closing. After all, you want to know what you’re getting into, right? Especially if you’re buying an older home that may have occasional problems (i.e., water in the basement) or if it's a neglected fixer-upper—there can be plenty of headaches if you don’t inform the seller in writing what you want to make the deal happen.
- Understand all of the costs associated with closing. From points, seller-assistance, taxes, escrow, etc., it can all seem overwhelming while it also feels like you’re signing your life away. This ensures that you don’t have a sudden scare when it comes time to close—it’s not a lot more than you thought it would be. (For related reading, see: What to Consider When You Finance a Home.)
- Be ready to live there for a while. Home ownership is a long-term commitment and is not to be entered into lightly, mind you. You have to be able to picture yourself building a life where and when you are considering buying a house. It may not always work out that way (i.e., career change necessitates a move), but it’s better to plan for the future knowing that you can see yourself living there for quite some time.
Now that you’ve got an understanding of what you should do prior to buying a home, you can feel better prepared to make that decision if or when it comes time to consider it.
And be sure to find an experienced financial advisor who always operates in a fiduciary capacity, works for an RIA firm, earns his or her money from fees (not commissions), believes in having an abundance of investment choices for clients, and has the heart and demeanor of a teacher, not a salesman, and chances are you’ve found the right financial advisor to help you prepare for buying a home. (For related reading, see: Comparing the True Costs of Buying vs. Renting.)