While the housing market can change on a day-to-day basis, some home buying tips will always remain true. Listening to your parents and even your grandparents about their home buying experiences can serve as great advice today. No matter what type of housing market there is, it will always be true that purchasing a home will be one of, if not the biggest investment of your life. Here are some insights you can use while purchasing a home.
ONLY BUY WHAT YOU CAN AFFORD
First and probably the most important amongst all of the home buying tips, is to spend within your means. In other words, don’t buy a bigger or more expensive house than you can afford. Many homeowners have had to learn this lesson the hard way. The real estate market can sometimes be unpredictable. Thus, causing a downturn in the housing and mortgage markets, leaving millions drowning in mortgages they can no longer pay.
While it’s true that lending standards have gotten stricter, homebuyers can self-regulate by purchasing homes no more than two to three times their annual income. It’s important to determine what you can afford to spend on a home at the beginning stages of your property search. In addition, it’s not a bad idea to start saving for your down payment now. This tip is especially important for first-time homebuyers. To read more about first-time home buying tips, click here.
SHOP AROUND FOR A MORTGAGE
As a prospective homebuyer, you have many finance and loan options. Since you will most likely need a loan for your big investment, it’s recommended that you meet with various banks and lenders. This way, you can ensure that you’re getting the best rate, terms, and conditions.
By shopping around for a mortgage, you may end up with financial savings and ideal conditions. Compare fees associated with applying through multiple lenders and don’t be afraid to mention you are considering competitors as it may earn you better rates. In fact, some may even have special promotions or financing options available.
You don’t need to get a loan until you have an accepted offer on a house. However, once you do, you’ll want to close on the loan quickly. So, it’s better to have a head start on the mortgage process even before you start your home search. By getting prequalified and pre-approved for a mortgage, you will have a better understanding of how much a lender will loan you and what interest rate you may receive once you’re ready to officially secure a mortgage.
MAKE YOUR MORTGAGE MANAGEABLE
In today’s world, it may seem silly to turn down a large loan offered by your bank. Especially if you have great credit. However, by putting down a generous down payment and choosing a lower mortgage loan, you will have more wiggle room in the future if your financial situation takes a sudden turn. It’s important to look at all of your options and talk with experts who have dealt with these situations countless times.
FOCUS ON THE BEST PURCHASE
Perhaps some of the greatest advice one could ever receive in regards to buying a home is “don’t buy the nicest house on the block.” You’ve probably heard your parents and grandparents say this at least once or twice in your life. While this may seem like a modest statement, there is some financial truth to this as well.
Buying a fixer-upper or an average-priced home typically ends up being the smarter decision in the long run. This is because you can add value to the home over time. If you buy the best house in the neighborhood, it’s possible the property won’t appreciate as quickly as other mid-range homes in the neighborhood. So rather than picking the most trendy, largest, or most modern home on the block, consider the real estate investment opportunities. Investing in a property with a good foundation that’s also in your price range can in fact be the better option for you and your family in the future. Buying a home is about finding a property that will work for you now as well as for years to come.
IT’S NOT A COMPETITION
Another important home buying tip is remembering that this isn’t a competition. Don’t buy more house than you need just because you think it will make you look better, more prestigious, or more wealthy in the eyes of others. With investment properties on the rise and social media encouraging a ‘show off’ mentality, it seems that everyone is living above their means now. It’s important to remember that social media has created an obsession of creating a picture perfect life. Social share online has repercussions. Make sure you think about your decisions before putting the final stamp of approval on anything. By choosing a home that you and your family can grow into, but isn’t too big or lavish, you’ll be investing in a future that allows you more financial flexibility.
John T. Wanninger is a professional in Edina and Minneapolis real estate. He specializes in luxury properties and condominiums throughout the Twin Cities. John leads the JTW Partners group at Lakes Sotheby’s International Realty.