Here are Some Tools You Need to Know Before Buying a Home

When I bought my first home/condo in late October 2016, once the paperwork was signed and the keys were rendered to me, I sat on the floor and thanked God for that moment. I also proceeded to play ratchet music for the next hour. By November 2016, the 2nd-floor pipe froze and voila rain forest in the living room. I actually laughed.

I wasn’t even in town so I figured that I rather go to sleep and handle it in the morning. For one, the floor was eventually replaced and the drywall was painted over once the home dried; I walked away with an important lesson.

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“Nothing Works All The Time…”

“Nothing works all the time”, is the essence of buyer’s remorse. That’s why you need a good overall plan. Three years later, I’m still here and the place has grown on me. I’m sure not all rookie home purchases will go that dark, however in hindsight, here are the few things that I wished I knew before buying a home. *Take all of these with a grain of salt. I’m merely sharing information.

1. Researching and Killing Dreams

As soon as you can, start reading Websites for information, newspapers, and magazines for real estate tips. Start watching HGTV (better Youtube). If you are buying with a partner; start listening to the needs and mitigate the wants. Wants are usually unnecessary and costly.

Note: if the area is up and coming. Check out the ratings on the schools in the area or better yet, the rental atmosphere just in case you upgrade later.

Try to pick the home and areas where the value will go up. Think about access to the Highway. There is nothing worse than getting off a highway and going deeper into the city to get home. Every extra minute is torture. Access to transit routes is a must!

2. Electronic Paperwork to Get Prequalified

You will be dealing with the bank. They are going to need tons of information to evaluate the amount of loan you can receive and the amount of interest they will charge you. If you are not prequalified, most real estate agents won’t even entertain you.

To get prequalified, you need to provide your income and the amount of savings and investments you have (W-2 statements, paycheck stubs, bank account statements, etc.). Going forward, get very familiar with your bank and other financial institutions’ logins so you can pull and access documentation on demand.

This will cut the process down considerably and you will avoid customer service in person or over the phone. When I was helping my mom; her face-to-face version lasted 2 weeks (the electronic version 10-15 minutes while on Facebook).

3. Bigger Down Payments

A bigger down payment helps you minimize borrowing. The more you pay upfront, the smaller your loan. That means you pay less in total interest costs over the life of the loan, and you also benefit from lower monthly payments.

To see how this works for you, gather the numbers from any loan you’re considering and plug them into a loan calculator.

4. Know the Lingo

Here are the components of a monthly housing payment:

Principal and interest: This amount goes toward paying off the mortgage loan.

Private mortgage insurance: You will pay this if your down payment is less than 20% on a conventional loan. You can, however, request to have it removed once your loan amount is 80% of the value of the house.

Homeowners insurance: This coverage protects you against damage and theft. We pay monthly into an escrow account, and the lender makes our premium payment for us annually. From my experience, they pay the insurance with your money. Because they don’t trust you and your spending.

Property taxes: These are due annually, but your lender may require you to pay a monthly portion into an escrow account.

Maintenance and repairs: To avoid any nasty surprises, real estate experts recommend saving between one percent and three percent of the home’s value each year. If you know absolutely nothing about fixing a home, remember this; AC, Heating, Plumbing, and Garbage Disposal in that order of most teary and expensive.

The bottom line: make sure you factor in the total monthly cost of owning that house.

5. 1 to 9 Years of Interest Hazing

Turns out you pay the bulk of the interest on your home loan upfront in the first 9 years. However, since most Americans move every 3-4 years, they merely trade in debt for more debt.

So beat, the average by either paying off your home in less than 9 years or simply holding your home for more than 9 years. *If you look at your amortization schedule, it will start to make sense. So buy less home and pay it off quicker.

You will likely be offered a home loan with a 30-year repayment plan, however, if you can do it, go for 15 years instead.

It’s extra but you pay less over time.

6. Get the Starter Kit. Keep it Affordable.

Here are the seven critical tips and tricks to home ownership that I wish I knew sooner. Buying a home should be easy and convenient.

Brand new homes are not as perfect as they appear, especially the cost.

People often think they can avoid maintenance but nope, it’s a constant. The bottom line: be realistic. No home is ever truly problem-free.

Keeping your housing expense low alleviates stress and opens up room for changes i.e. Savings and Investments, Baby, Travel, and Medical Emergencies.

7. Dem Fees!!!

With inspections, appraisals, minor repairs, escrows, insurances, and title? and even utilities; the fees will add up quickly.

Just breathe, if you keep it all affordable from jump street, the cost will remain affordable.

The Wrap-Up on Buying a Home:

I definitely learned a ton from buying my first home and here’s hoping all of this helps someone else. I have a Home Purchasing series which includes 4 Expert Methods of Home Evaluation, How much Can I Afford?, and Sold – House Hunting with the 30-something.

When all else fails, trust in the Net/Max Financial Plan: