Never bought a home before but thought that it may be time to dive into investing in one? Well before you do, let me give you some tips to help you make a more educated decision before stepping into the world of home ownership.
Here are the 7 things you should know before buying a home.
1) CAN YOU AFFORD A HOME?
Usually, I would have the best for last but I am placing the best thing to consider first on this blog. Purchasing a home is awesome if you can afford it. If you are in NYC and plan on staying here for the rest or most of your life, then buying would be a smarter choice. Rents increase at a ridiculous rate here in the city and purchasing would eventually even out to the rental rates in about 5 years, more or less. Then, the cost of owning your home will remain steady as the rental rates continue to increase.
However, even though your expenses will remain the same, it is still costly. There are things that you need to be mindful of other than the mortgage. There are taxes, insurance, additional insurance if you were to get an FHA loan, maintenance fees if you have a condo or coop, and much more. What about that leaky roof? How about that busted pipe? It could even be that your refrigerator has finally kicked the bucket. Things happen all the time and if you don’t have funds set aside for those sudden things, you can suffer greatly.
Another thing to consider is the cost of the initial purchase of your home. Unless you have a VA loan that covers 100% of your downpayment, you will have to have 3-20% for that initial investment. Not to mention, additional fees at closing which is around 3% of the purchase price.
2) THINK ABOUT GETTING A BUYER’S AGENT
Here in NYC, almost all properties are represented by a seller’s agent who has a contract with the seller. That seller’s agent owes a fiduciary responsibility to their clients, not to you. What does that mean? That means that they will work on their client’s behalf. They will tell them everything and work diligently for them, not you. Although they are supposed to be truthful to you, they do not work on behalf of you. Think about needing an attorney for a lawsuit against you. The other party hired someone to work on their behalf only. So you would need representation from your own lawyer who will be that person to communicate with the other party’s lawyer.A buyer’s agent is an agent who has a contract with you to work solely on your behalf. Sure you can go to a seller’s agent and purchase the property from them, they will get an agent from within their agency to work as a broker’s agent which is a dual agency. That agent still does not owe a fiduciary responsibility to you, however. That’s like hiring an attorney for that lawsuit against you from the same law firm as the other party that’s suing you.
Another reason why having a buyer’s agent is a good idea is because they will make your life easier. They know what you want, they will communicate with people for you instead of you getting harassed by other people, and they will educate you along the way.
3) GET EVERYTHING IN WRITING
Make sure to obtain copies of anything that you sign. Make sure that you read every documentation that you get and look up some real estate jargon before you start searching. Having everything in writing protects you and also keeps you in the loop. If you demand to have everything that you sign, your own copies, other’s will refrain from taking advantage of you. Also, don’t be scared to ask questions. Asking questions is a good thing. No one should get irritated if you just want to understand what is going on.
4) BE REALISTIC
We all want the perfect house in the perfect location with perfect neighbors and perfect shopping nearby. That’s everyone’s dream home pretty much! Sadly, even if you have a good amount of income and money saved, you may not be able to obtain that perfect home, but you can get close to it. Be open to other neighborhoods especially up and coming ones. Sometimes we are just priced out of what we truly want but it’s okay, we can still get something amazing just a zip code away. Move in condition? Maybe that can’t happen in the neighborhood that you’re eyeing but with a fixer upper, it could be possible. Is that extra half bath necessary? Do you really need a finished basement? What about an unfinished one instead? Remember, you can always remodel a home later or if you outgrow your space, you can sell it and use that money to buy a bigger place down the road. The possibilities are endless when you keep an opened mind.
5) KNOW YOUR LOANS
There are many loans out there and many rates out there too. I’d say shop around! If you check out a few places your score won’t get affected too much (if they are done close together). Also, think about how the rates will affect your mortgage. How long you will have to pay and the penalties. Some loans require no down payment, others can range from around 3.5% to 20%. Some have extra insurances like PMI with FHA loans. Some require you to live in your home for a certain amount of years to avoid penalties. Remember when I said ask questions? Be sure to ask loan officers a plethora of questions to make sure you feel comfortable with the type of loan and rates that they are offering. Also, make sure that you read the fine print on anything you are signing, they may have something hidden that will negatively affect you.
6) GET THAT INSPECTION
Don’t ever purchase a home without it, it can help you avoid the headaches and frustrations in the long run. You will have to cough up $300-$800 to get one done but this beats having to spend thousands later. Make sure that you get a copy of that report as well for your own records. You may also demand full disclosure regarding the property from the seller. He is legally bound to tell you if something is wrong with the home. Although he can’t tell you if it’s haunted or not, he has to tell you if there are leaks, structural issues and the like.
7) REMEMBER YOUR TAXES
Yes, I mentioned it again. Taxes are a must and the government can take your home away if you don’t pay them over a long period of time. You can either pay it when you pay your mortgage every month or pay it all at a specific date of the year. Whatever you choose, just make sure it gets done! Also, meet up with a tax professional in order to find out what tax deductions you qualify for.