Considerations When Buying a Home
Home ownership is not for everyone. Some prefer the flexibility of being able to move to a new city or country every few years. Others are more focused on big projects in their career or education to devote the proper time to buying a home. Some simply do not have the resources. Whatever your situation, it’s important to know the right reasons to purchase a home.
Owning a home is a big responsibility. There are both financial and time costs associated with the ownership and the upkeep of a house. If putting in the time and money is something that you can make central to your life, then you might be ready. There can also be outside, societal pressure to buy a home, as many see home ownership as a universal stepping stone. Make sure you are buying a home for you, and that homeownership will fit your life and life goals.
Financial readiness isn’t just whether you have enough for a down payment or not. Because you may qualify for a mortgage it doesn’t mean you should borrow money for one. Before you begin looking to pre-qualify, make a budget for yourself. Calculate the true costs of homeownership. Look where you stand with debt to income ratio.
Perhaps you need to pay down some credit card debt before considering applying for a mortgage, maybe you’re expecting a child, or looking to go back to school; all of these can be valid reasons to wait to purchase a home.
Security and Stability
If your debt is low, work life is stable, and you plan on staying in the same location for the next five years, you should be looking to purchase a home. At a certain point, the monthly rent check is money that could be better spent on building equity. If the money you spend on rent seems like it’s getting thrown away, deep down, you may be thinking of buying a home. If you already own a home, but that new promotion has started to make you feel like home maintenance is a waste, you also may be ready.
Should I Buy or Rent a Home?
The decision to purchase a home is one of the biggest choices in anyone’s life. For most, a home will be the most expensive thing they ever own. In the past, home ownership was seen as a natural progression in the course of someone’s life. But today, many people happily rent for years on end, and never find an appropriate time to make the jump to homeownership. So how do you know if you are ready to make that leap?
Setting Your Priorities
Although there may be a perfect home waiting for you in your desired area, the unfortunate reality is that many home buyers have to make compromises during their home search process. To be prepared, understand that there may not be the perfect house in the perfect location at the perfect price and in the perfect condition you require. Although this doesn’t mean that you won’t find a house you can afford in your perfect location, be prepared to be flexible on:
- Price of the home + extras
- Location of the home
- Condition of the home
If you know what your priorities are, then finding your ideal place to call home is both possible and realistic!
Location. Location. Location.
If location is your #1 priority, yet buying in that location will price you out of several of your other priorities, then you might have to compromise in several ways:
- Look for a different home type within the community, such as a smaller single-family home, a townhome or condominium. Decide if you can live with one less bedroom or other features on your list.
- Consult with a lender or a financial planner to discuss your options for increasing your budget. While no one should overspend on a home, you should recognize that going above your price range when you’re financing your purchase with a 30-year fixed-rate loan may only add a small amount to your monthly payment (e.g. $10,000 might only cost an additional $30 / month).
- Lower your expectations about the condition of the home. While everyone prefers a move-in ready home, you can often get a better deal on a home that needs some cosmetic repairs. Do your legwork though, as cosmetic repairs might cost more than you think once you dig a little deeper.
Homebuyers all face the same tug-of-war. Home price, size, location, commute, amenities and many other considerations all grapple for attention. Although all features seemingly have equal importance, many could be objectively classified as ‘nice-to-have’ over ‘must-haves.’ Often something or somebody has to make a difficult choice, but ultimately ideal compromises can lead to a perfect (or almost perfect) home choice.
What You Can’t Compromise On
You can’t compromise on having good, qualified professionals on your home-buying team. Attempts to cut corners or compromise on this part of the home buying process will only lead to pain further down the road. Do your due diligence in selecting these people for your team, and make sure they always have your best interests in mind.
Closing Costs and the Full Price of Homebuying
In the home purchase process, the sale price of the house itself is only part of the cost of buying. Besides the down payment, there are always closing costs in any home sale. Closing Cost is a singular term for a wide variety of fees and payments, paid out to a wide variety of people involved in the sale, upon which the sale depends for going through.
This is not a complete list of all closing costs, but a list of the most common ones. The different fees involved to close a home sale can vary widely from state to state.
Fees to the Lender
- Application Fee: The cost for the lender to process your application. Includes a credit check for your credit score or appraisal as well.
- Escrow Deposit: Frequently, two months of property tax and mortgage insurance payments.
- Homeowners’ Insurance: This covers possible damages to your home. Often the first year of insurance is paid at closing.
- Lender’s Policy Title Insurance: This is insurance to assure the lender that you own the home and the lender’s mortgage is valid, and it protects the lender from potential problems with the title.
- Loan Discount Points: One point equals one percent of your loan amount. This is a prepaid interest payment that lowers your monthly payment.
- Origination Fee: This covers the lender’s administrative costs. Often 1% of the total loan.
- Prepaid Interest: Most lenders will ask you to prepay any interest that will accrue between closing and the date of your first mortgage payment.
- Private Mortgage Insurance (PMI): For those making a down payment that’s less than 20% of the home’s purchase price, you will most likely be required to pay PMI.
- Property Tax: Lenders will want any taxes due 60 days within the purchase.
- Underwriting Fee: This covers the cost of researching whether or not to approve you for the loan.
Fees to Others
- Appraisal: For the appraisal company to confirm the fair market value of the home.
- Closing Fee: The title company or escrow oversees the closing as an independent party in your home purchase.
- Home Inspection: The home inspection will verify the condition of a property and recommend any home repairs that may be needed.
- Recording Fees: Charged by your city or county recording office, to keep up to date the public land records.
- Title Company Search Fee: Paid to the title company for doing a search of the property’s records. Ensures that no one else has a claim to the property.
- Transfer Taxes: This is the tax paid when the title passes from seller to buyer.
You’ve made your first step by visiting Homes.com, a simply smarter way to search for your first or next home!
Now learn a little about the tools we offer and discover more ways to focus in on your ideal home.
Homes.com aims to make your results and experience more personal, to help you set the priorities that are important to you and your home search partner(s)!
Homes.com Innovations For Your Home Search
There’s more to finding the perfect home than just matching the right price and number of beds and baths. Our conversational search begins the search experience and easily navigates you to your ideal location, gives you insights into average area pricing, and allows you to intuitively select match criteria that matter to you most. With many match filters offering a “must have” and “nice to have” option and ‘around’ option on pricing, your search results can surface many more relevant listings than traditional search filters. To help you assess how close of a match each property comes to your criteria, each home results clearly displays a match score which shows on a scale of 0-100 just how close your match is in meeting your personalized needs.
The search results’ page allows you to sort by match score, as well as more traditional sort orders (such as price) and our intelligent algorithms help you discover more properties through ‘close matches’ as well as expanding selection by noting limiting match criteria (e.g. “you could see more homes if you made ‘pool’ a nice-to-have”).
Homes.com Match really does offer a smarter search experience, which means you’ll find exactly what you want, and won’t miss out on homes you might like.
Homes.com Snap and Search (beta)
You can try out our innovative photo-to-home feature by uploading, referencing or (on mobile devices) taking a photo to almost instantly match with alike-looking homes in the area you select. Another way we want homes.com to be your go-to address to find your new address!
Whether it’s where you grew up, a house you pass on their way to work, or something you’ve seen on your favorite TV show, Snap and Search (BETA) can sift through architectural styles, building materials, and more to find similar properties. Simply choose any photo, whether it was taken, saved, pinned, or posted to start searching.
Keeping everyone on the same page during the home search can be tricky. HomeShare makes it simpler; no more texting and waiting for your spouse or significant search partner to check their email! With HomeShare you can find, share, and discuss listings with your home search partners (your agent included) in one place.
HomeShare helps categorize and simplify your shareable lists of favorites, accessible from both search results’ pages and home detail listing pages, to easily share with those that care, and help everyone decide on the perfect mix of must haves versus nice-to-haves!
Fully integrated into the home search process, HomeShare is simpler and smarter collaboration tool!
Homes How To
Within the resource you’re reading is a treasure trove of key information to help educate and empower you and your search partner(s) to both understand and appreciate the home search process. We also offer valuable information on selling an existing home, renting and financing your home purchase.
Whatever the need you have, the Homes How To section should provide everything you need and more! Check back here often and on our home tips blog to catch up on any updates or tweaks we make frequently to keep this resource as up-to-date and valuable as possible!