Buying a home is one of the biggest financial milestones for most people. Low interest rates make real estate more accessible, but are you well-positioned to get a slice of the American Dream? There are many factors to consider. These tips will help you make an informed decision you will not regret.
1. Hire a Reliable Realtor
Agents get a share of the sale price, which makes some consumers hesitant to use their services. In reality, it is true that a listing agent will not protect your interests as a buyer. However, a savvy realtor you hire will. You need a licensed professional on your side who will have your back in negotiations. This expert will guide you through the complicated purchase process, from the initial price negotiations to home inspections.
2. Consider the Real Cost of Renovations
Repainting a room is relatively cheap compared to fixing a kitchen or buying a new bath. Do not focus on the cost of appliances or counters alone. Factor in the labor costs to see if you can really afford to buy the house you want. Research remodeling options on https://hawaiitrustedrealty.com/builder/remodeling to calculate the budget for refurbishing.
3. Do Not Accept Contracts That Don’t Suit You
Buying a home involves a lot of paperwork. Many of the documents you sign will look like standard contracts. Yet, there is always room for negotiation. You are not obliged to accept a standard agreement. For example, you may want to waive a radon test or have more time to review your inspection. Such things can be included in the deal if you hire a qualified realtor.
4. Think Long-Term
Think ahead and consider any other financial commitments in your life. Do not rush to buy your dream house without analyzing the long-term costs and your income prospects.
Mortgage payments over the first five or seven years may not even cover any real equity. If you are not sure you will still be living in this house, buying it is not a good decision.
5. Think About Your Commitments
Apart from mortgage payments, consider other obligations. For example, the way assets are distributed at divorce is determined by state laws. If you and your partner are not married, the same rules may not apply. If you buy a house together, prepare an exit strategy in case things go awry. Consider hiring a lawyer to draw up a special written agreement concerning mortgage payments, titling, liability, etc.
6. Don’t Buy a House You Cannot Afford
Your mortgage company will always have a different opinion about a realistic property price. You may get approved for a mortgage around three times bigger than necessary. If your finances look good on paper today, are you confident that your income and expenses will remain at the same level for the next few years? What if the economy suddenly turns south?
There is no universal way to calculate the best ratio. Some experts recommend dividing your gross income by three to determine optimal mortgage payments. Others suggest a figure closer to 28%. Consider your future income, mortgage interest rates, the market, and related factors. It is best to ask your mortgage broker for clarification.
7. Look Beyond the Purchase Price
A new home comes with a variety of additional costs. You have to buy insurance, pay fees to the homeowner association, factor in real estate taxes, etc. Home improvement and maintenance can be expensive.
8. Research Mortgage Interest Deductions
Interest deduction prompts some taxpayers to purchase bigger houses than they can afford. They suppose their savings will make up for the difference, but this does not always work. This deduction is only applicable when itemizing on Schedule A, and it must exceed the standard deduction.
Just around a third of taxpayers claim the itemized deduction. Typically, their savings are lower than out of pocket. Besides, you cannot expect them to remain constant.