How to Buy a Home
Even experienced homeowners often run into trouble buying a house. Working with a dependable real-estate agent helps alleviate some of the stress because the agent can get information that you might not think about when you’re researching the neighborhood and its schools and other amenities. But buying a home will never be as easy as, say, going to the local farmers market to find peaches.
That’s because of all the moving parts – remembering to factor in costs such as maintenance and home insurance, for example – involved in homeownership. “The most important thing to know about home buying is what you can afford, what you want and where those two realities meet,” says Grace Keister, online marketing specialist for First Team Real Estate in Irvine, CA, the largest independent real estate company in Southern California. “Many new home buyers have unrealistic expectations about what real estate costs and what they can afford.”
Here are some tips on what to look for and how to save yourself money and inconvenience when looking for a new home.
Before you shop
- Make a wish list. Be realistic about your needs and those of your family. You probably won’t find a home with everything on your list, so prioritize your essentials. Be firm about defending your topmost priorities and flexible about those lower on the list.
- Check your credit. Your credit score can influence your home shopping experience. If you have good credit, you are more likely to get a competitive mortgage rate. A good credit score also can positively influence your home insurance premiums. If your credit is less than stellar, take steps to improve it before you start shopping.
- Set a budget. Use a mortgage calculator to figure out how much you can spend and what kind of deal you might be able to get. “It’s important to consider that each month you will not only be paying your mortgage but also property taxes, insurance, electric, trash, HOA’s, general household fixes and all of your current expenses to boot,” Keister says.
While house hunting
When you’re looking over homes that your agent suggests, pay attention to features that could affect your safety, home insurance rates, or maintenance costs. Consider the following:
- Location. Your home’s proximity to a fire department and a hydrant are among the factors that determine your risk for a fire. If the closest fire department is within 3 miles and the closest hydrant is within 1,000 feet, you could qualify for lower premiums – though other factors also play a part in determining how much you’ll pay for coverage.
- Vulnerability to the elements. Your home’s location helps determine the risk for damage caused by wind, thunderstorms, floods, or earthquakes. Check the storm history in the area to understand the house’s risk. Keep in mind that standard home insurance typically doesn’t cover flooding and earthquakes – you’ll have to buy a separate policy for those hazards.
- The age of the house. Though an older house might be aesthetically pleasing and even come with a lower price, it might cost you more in the long run. If the house is 30 years old and still has original features, it could need repairs or renovations almost immediately. Factor those costs into the price of buying the home. From an insurance standpoint, older roofs and plumbing or electrical systems represent larger risks for your carrier, so you’ll likely pay more for coverage. Conversely, you can qualify for discounts on home insurance if your home was built in the last 10 years.
Before you bid
- Request the house’s loss history report. You can see the claims history of the house for the last five years. That will give you an idea of problems, including those that might not be obvious.
- Inspect the house. Get a professional to assess the house’s condition, the state of the electrical system, septic tank, and water heater. Your lender likely will require this.
- Ask about features. Consider some features that could save you money on both maintenance and home insurance premiums, such as:
- Fire safety systems: The average fire claim in the U.S. is $33,000. If you have a smoke detector or sprinkler system, you can reduce your chance of having to make a large payout. It also could qualify you for discounts on your premiums.
- Security: Simply having deadbolt locks on entrances to the home can save you as much as 5% on your premiums. You could earn a 10% discount for a monitored home security system.
Talk these features over with your real estate agent before you start your search. He or she likely will have other advice for you as well. “First-time buyers should mentally prepare by realizing that home buying requires a level of flexibility,” says Keister of First Team Real Estate. “You may have to sacrifice some square footage for luxurious amenities or a swimming pool for the perfect location.”
Buying a home is always going to be a complicated process. Now that you know what money-saving features to look for in a home, you can house hunt like a pro. Keister says you’ll realize the right deal when it comes around: “When you know what you want and what you can afford, then you will be able to recognize the best deals on the market and pounce.”