Never bought a home before? Are you thinking it’s time to dive right on in? Before you do, let me give you some tips to help you make a more educated decision. You should never skip any of these, this way won’t make a costly mistake when you are ready.
So let’s begin!
Usually, I would save the best for last but I am placing the most important thing to consider first. Buying a home is awesome if you can afford it. If you are planning on staying at a place for a long time, then buying would be a smarter choice. In New York City, rents increase at a ridiculous rate. Buying a home would eventually even out to the rental market in about 5 years, more or less. After that point, the cost of owning your home will remain steady as the rental rates continue to increase.
Even though your expenses will remain the same however, it is still costly. There are things that you need to be mindful of other than the mortgage. There are taxes, insurance, and additional insurance if you were to get a FHA loan. When you are thinking of condos and coops, you will have either maintenance or common charges. 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 enough funds set aside, it can be costly.
Before buying a home, consider is the initial investment. Unless you have a VA loan that covers 100% of your down-payment, you will have to put down 3-20%. Not to mention the additional fees at closing which is around 3% of the purchase price.
2) ABOUT GETTING A BUYER’S AGENT
I love New York City. What an awesome place to live and invest in! But you should know, almost all of the properties are represented by a seller’s agent who has a contract with the seller in NYC. 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. Real Estate Agent’s are supposed to be truthful to you but they are not required by law to disclose certain things. Just consider when you may need an attorney for a lawsuit. The other party hired someone to work on their behalf, so you would need someone to represent you. You would then go out and hire someone to represent you. A buyer’s agent is an agent who has a fiduciary responsibility to you. They would work solely on your behalf. Sure you can go to a seller’s agent and purchase the property from them. Just remember, if you choose do that, know that they aren’t working for you.
Another reason to have a buyer’s agent is because they will make your life a whole lot easier. Remember, there are plenty of bad apples out there, but you can find diamonds in the rough. You will just have to do some research.
Do you have to pay them?
Most of the time, no. Usually real estate agents are paid by the seller however there are times when you would have to pay. These situations are rare. This would typically happen when the seller of a home isn’t paying much to their agent. Since they aren’t paying much to the agent, the agent decides that they don’t want to share the commission. Can they do this? Yes they can, it is called an office exclusive and is only listed within the office. Brokerages can’t post it on the MLS (Multiple Listing Service) which is agreed upon between the agent and seller. When you bump into that situation, you can either negotiate a price with the agent or choose to walk away. Most agents won’t show the property to you unless some type of agreement is made before hand.
Another benefit to having an agent when buying a home? You’ll get really aquatinted. They will get to know you and learn what you truly want in a property. Real Estate Agents will learn more about you and figure out the best neighborhoods that would speak to you. They will become your project manager, managing everything by communicating and staying on top of everything. They will keep all of your appointments and paperwork organized and orderly. The ideal buyer’s agent would educate you along the way, keeping you updated on the market and hot new properties that you may be interested in
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. Be sure to 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, at the perfect location, with perfect neighbors, transportation options, and shopping nearby. That’s everyone’s dream home and location pretty much! Sadly, even if you have a good amount of income, you won’t get that “perfect”. Good news? You can get close to it. Be open to other neighborhoods especially up and coming ones. Sometimes we are priced out of what we truly want. And you know what? That’s okay, we can still get something else amazing just a zip code away.
Move in condition? Maybe that can’t happen in the neighborhood that you’re eyeing on 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. And if you outgrow your space, you can sell it and use that money to buy a bigger place or keep it as an investment property. The possibilities are endless when you keep an opened mind.
5) KNOW YOUR LOANS
There are many mortgages out there as well as rate differences so I’d say shop around! If you check out a few places within a day or two, your score won’t get affected too much. Also, think about how the rates will affect your mortgage, higher rates mean higher monthly payments. How long will you have to pay and are there any early payoff penalties?
Some loans require no down payment, others can range from around 3.5% to 20%. Others have extra insurances like the PMI that comes with FHA loans. And 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 those mortgage representatives a plethora of questions to make sure you feel comfortable with the type of loan, conditions 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 approximately $300-$800 but this beats having to spend of thousands later or being stuck with a lemon. 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. They are legally bound to tell you if something is wrong with the home. They can’t tell you if it’s haunted or not but they have to tell you if there are leaks, structural issues and the like.
7) REMEMBER YOUR TAXES BEFORE BUYING A HOME
Taxes are a must and the government can take your home away if you don’t pay them for 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.
These are just a few things to think about when you are starting your home buying journey. If you have any other questions regarding purchasing a home, please feel free to leave a message or contact me!