Buying a house is not like picking up dish towels from a store rack; it requires serious thought. Some people even use an agenda planner to jot down monthly tasks along with dollar amounts to avoid a “bank overrun.” Let’s face it: buying a house not only saps your mental and physical energy, but it also gobbles up wads of cash, often requiring you to run to the bank for more funds (again).
Buying a House: Monitor the Market
We’re not referring to the environment in terms of greenhouses or acid rain—although you do want a house that meets environmental standards. We’re talking about monitoring the housing market. Is it a seller’s market or a buyer’s market?
You might wonder how this affects your decision to buy a house. The answer is simple: buying a home in a competitive market could lead you straight into a situation where supply is scarce and interest rates are unfavorable. You’ve likely heard investment experts claim that real estate goes through cycles—boom and bust, dirt cheap versus pricey. When demand for housing outpaces supply and builders can’t keep up, lenders seize the opportunity to charge exorbitant mortgage rates.
Real estate was thriving until a year or two ago. Millions of apartment dwellers became first-time homeowners, interest rates were low, and the construction industry was bustling. In the last two years, that frenetic pace has subsided, and the housing market is beginning to stabilize. Interest rates are inching up, and we may soon witness house prices coming down from their exorbitant levels. However, when that will happen is the $64 question, as predicting real estate trends is as tricky as predicting the stock market. Only a fool would waste time speculating.
Still, it pays to monitor the market because the economy will, to some degree, dictate whether now is the right time for you to secure a mortgage. Next to marriage, mortgages rank among life’s biggest anxiety triggers. Many of us have agonized over the question: “Are mortgages larger than life?”
In a way, they are. But with intelligent planning, you can avoid the common pitfalls of buying a house—especially if it’s your first time and you’re feeling a bit overwhelmed.
Buying a House: Going Solo or Seeking Help?
If you’re planning to buy a house on your own to avoid the hefty commissions charged by most real estate agents, we commend your independence. Just remember to do your homework, check your facts and figures, and double-check them. Before you take the plunge, familiarize yourself with some real estate lingo; like any industry, real estate has its own specialized vocabulary. The terms used in mortgage documents and contractor agreements can be confusing, especially for first-timers. Take it from us: you’ll go through quite a paper chase as your negotiations unfold.
Many prefer to pay commissions to transfer some of the headaches associated with buying a house to an agent. Most people feel more confident trusting someone with experience, savvy, and connections in real estate. Those buying a house for the second or third time often return to an agent, especially if their initial experience was hassle-free. Many swear by the advantages of using a real estate agent, who has an extensive network of contacts, access to MLS listings and databases, and the ability to foresee potential problems in the home-buying process. Experienced agents can quickly assess whether the seller’s asking price is realistic or inflated and whether your budget allows for your desired type of house.
One last note: there’s a common belief that real estate agents are only out to make money for themselves. While there have been instances that support this, most real estate agents take their jobs seriously. They work hard and genuinely enjoy what they do. They must complete a course, pass an exam, and often sacrifice weekends and holidays. Becoming a real estate agent involves a combination of brain work, hard work, and sometimes, luck. They encounter both good and challenging clients.
Buying a House: Think “Mortgage”
No mortgage, no house. That’s the long and short of it—unless you have a suitcase full of cash and don’t need to deal with banks. A few fortunate people can pay in cash, but the majority of us rely on mortgages. By the time buying a house becomes a full-fledged decision, a mortgage often becomes a constant presence in our lives.
It’s best to address mortgage issues right away.
First, meet with your bank to get pre-approved. Some builders and agents may take you only half-seriously if they find out you haven’t been pre-approved for a mortgage. The bank will ask you a series of preliminary questions:
- Your income and that of your spouse
- The mortgage amount you wish to borrow
- The amount of down payment you’re willing to make
- Your debt profile (lines of credit, student loans, car loans, credit card balances, etc.)
- Your credit score
- Your monthly expenses in relation to your earnings
- Any other information the bank may need to determine your eligibility
To avoid overwhelming you as a first-time buyer, we should warn you that the bank may request additional documents. During your meeting, you may also want to discuss mortgage insurance (usually required if your down payment is less than 15%-20% of the total mortgage loan), making extra mortgage payments (if you want to pay off the mortgage sooner), and getting a co-signer.
If this isn’t your first time but your second or third, consider discussing the pros and cons of renewing your existing mortgage or whether you should apply for a second mortgage for a vacation home or retirement condo.
House to Buy or Build from Scratch?
Once you have your mortgage details sorted out and building a house from the ground up has always been your dream, dedicate some time and energy to selecting a reputable home builder. Many people prefer not to settle for pre-fab or turnkey houses; they want to put a personal touch on their homes by selecting materials and fixtures rather than accepting the builder’s choices.
When selecting a home builder, ensure they are licensed by the city or state government. Check their reputation; if they come highly recommended, it will provide peace of mind compared to choosing from the Yellow Pages. Read their contract carefully, scrutinizing the building schedule to ensure they deliver on time. For example, if they promise to complete digging, laying pipes, and building the foundation by week 3, verify they’re on schedule. Delays can lead to significant headaches.
If you’re buying an existing home, obtain appraisals regardless of when the house was built. The same rule applies when purchasing a condo. Be vigilant about structural deficiencies.
Moving In? Congratulations!
So, the house is finally yours, and the moving truck just dropped off the remaining boxes. Wonderful! This is an exciting time, and the thrill of buying a house doesn’t fade on moving day. On the contrary, your agenda planner will now be filled with a “to-do” list that seems endless.
For instance, your activities will shift. Are you considering stripping the old paint and applying latex? Not a fan of the previous owner’s carpets and want hardwood floors instead? Where can you find hardwood at a good price? If you have young kids, perhaps investing in a home alarm system is a wise idea!
Oh yes—there will be tasks to keep you busy for a lifetime. A house is just a house, but with your efforts and TLC (tender loving care), you can transform it into a stunning home for your family to enjoy for many years to come!
