The biggest investment many of us will make is buying a house, and mistakes can be costly. To help weed through the home-buying jungle, we've gathered the knowledge and strategies every home buyer should know before beginning the hunt.
First, examine your lifestyle. Do you long for bucolic pasturelands? Feel energized by urban cityscapes? Looking forward to a family-friendly suburban lifestyle? It's important to think of the limitations each locale places on your lifestyle and the perks each has to offer before making the commitment to buy.
Suburban lifestyles are flexible, offering children the opportunity to play outdoors and enjoy a neighborhood environment; urban areas offer greater social, culture, educational and career opportunities; rural environs offer privacy, room to roam and the ability to pursue hobbies — such as gardening — on a larger scale.
In addition to locale, it's important to think about the type of dwelling you're considering. Will you quickly outgrow that handsome city brownstone? Is a country cottage the perfect size? Will purchasing a condo allow you to forgo lawn and home maintenance and enjoy more leisure time?
Costs of ownership
There's more to consider than just a monthly mortgage payment. Will you be able to afford the expenses that come with owning a home? Utilities, property taxes, repairs, homeowners association fees, lawn maintenance (unless you will do the work yourself) can all add up.
If you're moving to a new part of town or a new city, it's important to consider the cost of living for that area. Transportation, school tuition and everyday living expenses can also make home ownership more expensive than it initially appears.
Build or buy
Having a home custom-built to your specifications can be expensive. But are you ready to take on remodeling and updating an older home to meet your needs?
A remodel can often be expensive and in the end, is less satisfying — and finishing a project yourself, without experience, can result in the purchase of costly tools and the loss of your valuable time.
Do your research before signing with a contractor or deciding to revamp an older home.
Location, location, location
A bargain is never really a bargain when located in a bad neighborhood. Sometimes lightning will strike and gentrification of certain areas will result in skyrocketing property value — but that's rare. It's better to take a chance on a smaller home — or one in need of repair — in a great area where the value will only rise.
A loan rate can look great in an advertisement, but once bankers have drawn you in to the branch office, what will you really pay? Points, PMI (private mortgage insurance) and closing costs can drive your mortgage cost up.
Some programs allow buyers to have smaller down payments — but how long are you required to stay in the home without penalty — and how much more will you pay each month?
Be sure to read all the clauses and fine print before getting a mortgage. And don't be afraid to shop around for the best rate.
Most real estate agents represent the seller, but a buyer's broker represents your needs and desires and helps you locate the property that's best for you.
While buyer's brokers are difficult to locate in some markets, locating a professional advocate who is required by law to get you the best price and terms can alleviate home shopping stress.
Most provinces require that a home seller disclose potential problems with the property — but the homeowner may not always know or reveal existing structural problems (despite the legal requirement). The only way to truly know what's going on inside (and over and under) a home's structure is to secure the services of a reputable home inspector. Expect to pay $300 to $600 for the inspection. It seems like a lot of money, but consider the thousands it could save you if the home isn't up to code or has major issues.
Perhaps one of the best ways to protect yourself is to have every part of the sale in writing — and make sure you understand every aspect before making a commitment. Legal jargon and real estate terminology can be confusing and somewhat frustrating, so hone your real estate vocabulary before house hunting, and don't be afraid to ask a lot of questions along the way.
After the sale
First, purchase homeowners insurance. Next, decide if the purchase of a home warranty (if not included as part of the sale) is in your best interest. Finally, make sure your title has been taken care of during the sales process.
Are your property taxes rolled into your monthly mortgage payment? Or will you be responsible for paying them yearly? Don't forget to keep paperwork for your annual federal or state income tax return — you can often deduct the property taxes, points and interest paid on a mortgage. Set up a consultation with a tax accountant to learn more about the restrictions on these types of deductions.
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