The Do’s and Don’ts of Buying a House

There are a lot of things that go into buying a house from financing to inspections, deciding on location and neighborhood to negotiating closing costs. Here are some of the most common mistakes and the best advice in home buying.

When Buying a Home

Whether it’s your first or you’ve done this many times before:

Don’t

• Change jobs, finance expensive cars, or open large credit accounts 6-12 months before buying a home. All of these considerations affect your debt-to-income ratio and lenders look at job stability when deciding mortgage applications.
• Buy the most expensive home in the neighborhood unless you’re planning on living there forever. Do buy the cheapest home in an expensive neighborhood because as property values climb, yours will soar.
• Become “home poor.” It’s rarely a good idea to buy at the top of your budget. You may want to buy new things for your home, redecorate, or you may experience unintended expenses. If you have any of these, and you purchased at the top end of your budget, you’ll be under financial strain.
• Get discouraged or attached to a house before you have a contract on it. Some markets are really hot and bidding wars can occur. It’s also possible that two offers come in and one is cash. This may make the other buyer more attractive to the seller since financing is not involved. There are lots of ups and downs when buying a home. Remember, you will find a house you love and your real estate agent will help you get there.
• Miss the opportunity to negotiate. Even if a buyer won’t move on the home price, there are plenty of other areas to negotiate. You could ask for a home warranty to cover mechanicals, a paint or carpet allowance to replace old decor, or the sellers to pay for some or all of your closing costs.
• Forget the home and termite inspection. The home may look immaculate but there’s a lot an untrained eye won’t notice. Call in a professional to give you peace of mind.
• Forget title insurance. Your home is likely your largest investment. Safeguard it accordingly.
• Dismiss closing costs. Unless you’re going to negotiate closing costs with the seller, you need to know that you’ll be paying between 2-5% of the home’s price in closing costs the day of closing. Learn more about them with our free ebook.

But we don’t want to limit the enjoyment in home buying either. Now that you know what not to do, let’s visit some of the things you should do.

Do

• Spend wisely. Always have a budget worked out before you start “shopping.” That way you’ll know what you can afford and won’t be moved simply by what you see.
• Get pre-qualified for financing. If you’re financing a home, get pre-qualified first. This is very important because in a hot market a seller will almost always take an offer from someone with secure financing over a maybe.
• Think of resale values. There are things about a neighborhood or home, that while they may not bother you, it may make it difficult to sell later. For instance, being close to a power plant or busy road may turn off buyers. Unless you plan on being there forever, don’t just think about your preferences but about what the person you’re selling it to down the road may like.
• Close out lines of credit you don’t use. Lowering your debt-to-income ratio will make you more desirable to a lender. Even if you don’t have any debt on your cards, having large credit accounts open can be a red flag to a lender.
• Check your credit score and credit report before applying for a loan. You don’t want any big surprises when you’re trying to secure financing.
• Ask questions if something is unclear. The home-buying process can be confusing. Don’t feel like you’re alone in it. You have access to a professional team that can help you understand the language and nuances of real estate transactions.

At Bay National Title Company, we know how important it is to provide the necessary resources our clients need to make informed decisions. If you’re in the market for a house, download our free ebook on the Homebuyer’s Guide to Understanding Closing Costs.