Buying Property
I Want To Buy A House
Buying your first home – or any home – is unlike any other decision we make. Buying a home can be exciting. Time consuming. Risky. Intimidating. Exhilarating. Exhausting. Amazing. Relationship-building. Disastrous. Sometimes it can be several – or all – of these at once.
When you first considering buying property, the first thing you learn is how much you don’t actually know. The process is new. The terminology can be daunting. The paperwork is – egads, the paperwork! So you’re saying I have to get pre-approved for a mortgage before I can make an offer, but if my offer is accepted I have to get approved again? Are you suggesting that even if I’m buying a house with cash and I’m ready to buy my house now, it has to be appraised by someone and evaluated by someone else and inspected and documented and approved and…?
How many hoops and people and forms and steps do I have to go to before I can just, you know… BUY MY HOUSE?
Maybe the reason buying your first home is so often thought of as the hallmark of adulting isn’t so much the money or responsibility or stability of it all. Maybe it’s just because if you survive the process, you can probably handle pretty much anything that follows.
What’s The Best Way To Buy A House - 7 Key Steps
It’s always tricky to speak in absolute terms, but there are a few general guidelines for new or cautious home buyers which tend to make the process as painless and positive as possible.
STEP 1
First, figure out how much you can realistically afford
Whether it’s for you or your family to live in, your plan on renovating, or you want to rent it out, everything has to start with a realistic budget. Please note this is NOT the same as what the bank says they’re willing to loan you or what your credit score says you can buy. No one knows your financial situation better than you (hopefully). How much can you reasonably cover without struggling each month? Keep in mind this isn’t just for this month or next month – in most cases it’s for the next fifteen to thirty years. A good general guideline is that your total housing costs – mortgage, insurance, taxes, homeowners’ association dues, etc. – should not exceed about 25% - 30% of your take home pay. Use an online mortgage calculator to play with total amounts, monthly payments, different interest rates, etc. Your house payment is made up of many different things, so spend some time doing the math before you even start to shop around. We all love those shows on TV about buying or renovating homes, but they’re exactly that – TV shows. The real world lines up with those shows about as closely as real relationships look like the Bachelor or real hospitals run like ANY medical drama.
STEP 2
Second, take a realistic look at your current credit situation
How’s your credit score? How much other debt do you have at the moment? What do things look like at work over the next few years? Any major life changes you can reasonably anticipate? If it’s possible for you to knock out some major debts and maybe bump up that credit score with some applied effort over the next few years, it might be worth putting off buying property. I get it – no one likes to wait. I want to buy my house NOW! But you’re making what for most of us is the single largest financial commitment of our entire lives. Taking a few years to secure better terms and more solid footing often makes a great deal of sense.
STEP 3
Third, educate yourself on mortgage options
Read the appropriate Goalry blogs and check out other reputable financial sites as well. You don’t have to use the place your real estate agent suggests or the bank where you do your checking. You can save thousands of dollars by shopping for competitive rates at both traditional lenders and through online lending institutions. Make sure you understand how different interest rates work and why it might be worth taking out a fifteen-year mortgage instead of a traditional thirty-year mortgage. Knowledge is power, and in this case, power means more options and less stress.
STEP 4
Fourth, get pre-approved with the lender you choose
This is more or less required before realtors or sellers will take you seriously in most cases. It doesn’t lock in financing as completely as the term suggests, but it certainly establishes that you’re credible and serious and that it’s worth working with or negotiating with you. This is also a stage at which it can prove quite helpful to have accurate information about the true value of the property you want to buy – preferably something you can pull up on request or reference when asked.
STEP 5
Fifth, list your priorities in a home
Sure, you’ve probably already talked about this and have a pretty good idea what they are. Once you’re shopping, however, it’s easy to become distracted by pretty things or unexpected features or overwhelmed by information and options. A short, clear list of “must haves” and “really wants” can help make home-shopping far more efficient and means fewer regrets after committing.
STEP 6
Sixth, shop for a home
You’d think this would have made one of the first five steps, wouldn’t you? Like performing on stage or proposing marriage, however, preparation is everything. If the foundation isn’t there, the shopping won’t get you where you want to go.
STEP 7
What’s Step Seven?
Once you’ve done everything you can do to prepare and make the best decision possible, don’t look back. We should learn from our mistakes or struggles, absolutely – but forward! Always forward.
At Accury, we’d like to help with the process in any way we can. Our informational blogs like all of those across the Goalry family are written in the conviction that most people can take more effective control of their personal and small business finances if only given the right information, tools, and opportunities. We’ll soon be releasing a re-imagined line of versatile financial applications to help you more efficiently manage your spending, savings, budgeting, taxes, retirement, and – of course – buying property. Unlike what you may have come across elsewhere, you won’t have to rely on someone else’s estimates. You’ll have accūRATE.
This isn’t your grandfather’s world or your mother’s financial landscape. You can know more, and do more, and achieve more, often from the same phone your parents still think is primarily supposed to be used to call people or the same laptop on which you may be reading this right now. It’s a complicated world, but not everything has to be as difficult as it’s been in the past. And you don’t have to do it all alone.
+ Which House Should You Buy?
All the focus on financing and paperwork and time frames assumes you already know which property you want. While you don’t want to wait until you’ve set your heart on a specific location or home when you’re buying property to begin getting serious about the financing and the logistics, at some point you’ll have to commit to a specific home on a specific plot of land and focus on making that deal happen. Sometimes that’s the hardest part. When you’re looking to buy a house, it should be an advantage if there are plenty of houses to buy, right? While buying property is certainly a more promising venture when there are plenty of options available, the sheer number of choices can become a challenge in and of itself. If you hire a realtor, he or she will no doubt come up with endless possibilities for you to consider. Real estate companies, “virtual home tours” pages, and house buying websites only multiply that number. You may have some idea how much space you need and what features you’d like. Some things may be non-negotiable – the number of bedrooms and bathrooms, whether or not you’re OK with stairs, how you feel about “brutalist architecture.” Others might be better described as “preferences” – your affinity for wood-burning fireplaces, your goal of a bigger kitchen, the convenience of being close to public transportation. You may not find everything you want exactly where you want it, but at least those things are fairly easy to determine. A home either has three bedrooms (or potential bedrooms) or it doesn’t. It’s either near the water or it isn’t. What’s much harder to determine is exactly how much you can afford, how much you’re willing to pay (those aren’t always the same thing), and what each home is truly worth. The money isn’t the only consideration, but it’s a big one – and it impacts almost every other factor in your decision-making process.
+ How Much Should I Pay?
We live and work in a (relatively) free-market, capitalistic system. We all learned about supply and demand in high school, and it’s enough of a very real factor in how things work for us every day that it’s easy to assume when buying a house that – like everything else involving money – it all comes down to how much you want something versus how badly someone else wants to sell it and how many other options each of you have. Surely buying property is no exception? The idea isn’t technically wrong. When you buy property or anything else, what you choose to pay (or not) certainly indicates what it’s worth to you. But just because this definition of value is correct doesn’t mean it’s complete. There are other considerations when determining how much a home (or any other property) is worth. Sometimes they’re personal – I’m moving across the country because X, Y, or Z, and I want to buy a house before the first of next month! That’s going to change the equation substantially. Sometimes it’s practical – I’m looking for houses to buy in order to fix them up and sell. It will supplement my retirement income and fill my days. In that case, there’s no hurry and you’re looking for just the right deal. But property has tangible value apart from your love of big yards or your desire to live closer to Grandma or how much you hate big cities. Part of all that paperwork we talked about earlier is the very precise, intentional calculation of the formal dollar value of each specific home in its exact condition that precise moment and in the context of where it’s located – the neighborhood, the community, the geography, and even the state it’s in. Before you buy land or the property constructed upon it, you should know that precise calculated dollar value. Then, if you’re willing to pay more than that, you have that right. If you’re not willing to go that high, that’s OK, too. But knowledge is power, and the more you know about the property you’re about to buy, the more power you have in the process. This is true whether you’re buying a foreclosed home to fix up and rent or buying a new home so you and your partner can start a family. Banks and other lenders certainly believe in it. The most successful realtors believe in it. Even those home buying companies who scribble their phone numbers on little signs stuck to trees and light fixtures everywhere know how true this is. The more you know, the better your chances of making the experience what you want it to be. If only it could be a little quicker and easier to get that information when you need it and in useful formats and combinations – like clearing the bars on your fitness tracker or checking for cute baby pictures on social media. Hmmm…
+ What Determines The Value of A Home?
Most popular websites claiming to “estimate” the value of your home (or anyone else’s) rely on very general information. These are useful starting points, but far from the full story. If you were looking to hire a personal assistant, you might start narrowing down your choices based on resumes, but hopefully you wouldn’t offer anyone a job without an actual interview. Buying property can work much the same way. The basics are relatively easy to determine. What’s the square footage? How many bedrooms? How many bathrooms? How big is the yard? How old is the home? Then comes location. How many goods and services are within walking distance? What’s the school district like? How often are there tornados, floods, or other natural disasters? Is the neighborhood up-and-coming or dying-and-decayed? Is the property conveniently located near the highway, or painfully close to a major airport? Finally, are there similar homes in the area which have been sold recently? How long were they on the market and what was the final purchase price? Sometimes the replacement value is considered. What would it take to replace this structure from the ground up using comparable materials? This is more common with commercial properties, but it can be a consideration when buying a house as well.
What’s accūRATE?
These are the basics used to determine the starting point for a home’s accurate value. Unfortunately, an estimate is where too many house buying websites or eager novices looking to buy a house stop. Not so the true professionals. A proper appraiser physically walks through the property making detailed notes over each feature or flaw. They’ll note the quirky staircase that’s visually appealing but might make it difficult to move in and calculate the value of that reading nook no one notices from the outside.
A detailed appraisal looks at the quality and source of the utilities. It notes the improvements made to the back porch and the convenience of that alleyway along the back. It recognizes the potential problems with the gutters that look nice from out front but are beginning to damage the fireplace and that weird section around back. It clarifies that while the detached garage is as spacious as described in the paperwork, there’s also very little room to pull in or out because of the surrounding trees and neighbor’s fencing. Every design feature, every bit of normal wear-and-tear over the years, the specifics of each crawl space, the partially finished basement, the potential problem with the attic.
Exactly when was the furnace replaced? How big is the hot water heater? Are there enough outlets on the second floor? Is the tiling in the master bathroom made of what we think it is? You may not care about every detail, but anyone who’s had experience buying and selling houses will tell you that the number of things you may not think to ask about when you’re new to buying property are often the things that make all the difference for your long-term satisfaction or your ability to sell the property later at a reasonable profit.
If the home has been used as a rental property (or if the property is non-residential), what sort of income has it been generating in the past year? The past decade? What’s changed over that time? What hasn’t? What’s planned for the area in terms of upcoming improvements or expansion? Is the property likely to increase or decrease in value based on the available information?
Join the Accury Store
If you’re buying property – especially if you’re buying a home – someone will be doing this before the deal is finalized. Wouldn’t it be nice to have that information much earlier in the process? Wouldn’t it be nice if you could easily access those details and figures when first considering buying a new home, buying a used home, or even buying a foreclosed home? Even pre-approval and financing could be dramatically simplified if you simply had a practical, flexible way to access accurate information at any point along the way when looking to buy land or buy property on that land.
Surely the best way to buy a house is to have the most accurate information available, whenever you need it, and wherever you happen to be, right?
Where would you like to begin?
