It’s fun to go house-hunting and dream about moving into your future home. But buying a home is one of the biggest investments most of us will make during our lifetime — it’s a long-term commitment that costs more than just the down payment. Before you dive in, take the time to research the process. There’s a lot to know and many mistakes to avoid. Here are some recommendations to help you prepare:
1. Understand how the home-buying process works.
- Determine your budget and what you can afford. Be sure to look at your cash reserves for a down payment. (A good rule of thumb is to look at homes priced at two to three times your annual income. That said, each homebuyer’s financial scenario is unique — be careful not to take on a mortgage you’re not comfortable you can afford. Our online Mortgage Calculator can help you determine what your monthly payment will be.)
- Prepare for your house-hunt. Write down your wish list — including what home features you must have and what features would be nice to have, what location criteria to consider, etc. (See #4 below for more on this.)
- Find a good mortgage lender with an excellent reputation, and get preapproved for your mortgage. You can get started researching a Standard Affluent Private Bank mortgage product here.
- Research homeowner’s insurance. Do you need additional coverage for floods or earthquakes that aren’t covered by basic insurance?
- Consider hiring a real estate agent to help you in your search, or start house-hunting on your own.
- Make an offer when you find the right home!
2. Compare mortgage rates.
There are so many options for comparing mortgage rates, and the easiest way to start is by searching online. Two common mortgage types are fixed-rate mortgages and adjustable-rate mortgages (ARMs). There are also low-down-payment programs that provide greater flexibility to meet your financing needs. Make sure you completely understand the rates, terms and whether the mortgage comes with a prepayment penalty or not. Don’t be afraid to ask questions. If you’re unsure where to begin, speak with someone on our Mortgage Team. Even better, download a checklist to help you get organized before you meet with a mortgage specialist.
3. Is buying a fixer-upper a good idea?
You might find your dream neighborhood, but a fixer-upper could take you over your budget. If you’re willing to spend extra on renovations (in addition to having the money needed and knowing a trustworthy contractor), then it may be for you. Beware of additional costs such as electrical upgrades, labor and possible mistakes the contractor could make.
Every homebuyer should get a thorough home inspection, and get at least three quotes if you’re hiring a contractor. When it rains, consider an additional inspection to check the basement and foundation. What if one problem is found that leads to another? Do your research, ask a lot of questions, and understand everything.
4. Define what you want and need in a home.
What must you absolutely have in a home? (How many bedrooms do you need? What about backyard size and features, proximity to schools or work, neighborhood features, etc.?) And what would be nice to have but not really needed (nice landscaping, a pool, specific décor, etc.)? When defining those wants and needs, think about personal preference vs. what would add value to your home.
Before your first house-hunting appointment, make a wish list or search online for a helpful home-buying checklist. Some of the nice-to-haves can be added later, when your budget allows. Don’t go overboard and spend more than you need to.
When you’re ready to take the next step toward buying your dream home, contact a member of our friendly Standard Affluent Private Bank Mortgage Team to learn more about the best mortgage product for your needs. We’re here to help!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
