Every home buyer is different, but they all have one thing in common: They have lots of questions.
Purchasing real estate – whether you’re a first-time home buyer, a seasoned regular or an investor – is a big deal. When you’re going through the process, your lender, your real estate agent and the other professionals you work with can help to answer any questions you have. To make sure you’re asking the right ones, here are the top questions to ask when buying a home – for every type of buyer.
Am I ready?
Many first-timers go into the home buying process blindly, without stopping to consider their own financial readiness first. Before you start the process, you need to figure out whether you’re a creditworthy candidate in the eyes of the lender.
Your goal likely won’t just be to get approved for a mortgage, but to get a good rate as well, as this will affect the size of your monthly mortgage payments and the amount of money you spend on interest throughout the life of the loan. While you may be anxious to get started on your homeownership journey, waiting a little bit while you build credit and save for a larger down payment can save you a significant amount of money in the long term.
First-time home buyers may want to also ask themselves if they’re prepared for the responsibilities that come with homeownership. Owning a home is great, but it also means you’re responsible for everything that happens to it. Repair and maintenance costs can be quite high and come at inopportune moments. Make sure you’re prepared for that.
What will my return on investment look like?
For buyers looking to get into real estate investing, buying a rental property can seem like an attractive choice. However, as with any investment, it’s important to look at the money you stand to gain (or lose) before making a commitment.
Recognize all of the costs that come with this type of investment. Not only are there maintenance and repair costs, but you’ll also have taxes and a new mortgage payment to think about. Hopefully, the rental income will cover these costs, but if it doesn’t, you might end up having to pay out of pocket.
Do some research on the housing and rental market in your area and figure out what it would take for you to turn a profit on your rental and what your plan is if you’re unable to do so.
While there are downsides, careful investors can gain a lot from a rental property. By doing your research and investing wisely, not only will you have the opportunity to profit from rental income, but you’ll have a valuable, appreciating asset in your financial profile as well.
How much of a risk is it?
There are two main ways to buy a foreclosed home: at a foreclosure auction or through a real estate agent.
If you buy at an auction, you may get a home at a bargain price, but you’re taking on a large amount of risk. When you buy through an auction, you don’t get to inspect the home before you buy.
Buying a bank-owned property through a real estate agent is a slightly less risky route because you’ll be able to have the home inspected before you make a commitment.
Foreclosed homes, no matter how you buy them, can come with problems. If the owner was behind on their mortgage, it’s likely they weren’t able to keep up with maintenance and repairs either. The home may be severely neglected or even vandalized.
If you’re considering purchasing a foreclosed home, keep in mind that any money you save from buying a home on the cheap can quickly be eaten up by repair and renovation costs.
It’s also imperative that you conduct a title search on the property before you commit to it, as you could end up on the hook for any liens filed against the property.
How do I make an attractive offer?
FHA loans can be great options for first-time home buyers, those who don’t have enough money saved up for a large down payment and those with less-than-ideal credit.
Unfortunately, you may come across some sellers who aren’t exactly jumping at the chance to do a deal with an FHA borrower. Why is this? Some sellers consider FHA borrowers to be riskier and are hesitant to get into selling agreements with them.
The FHA also has stricter guidelines for inspections and repairs than there are for conventional loans. If the property doesn’t pass inspection, repairs need to be made. Often, these repair costs fall to the seller.
If you’re worried about being turned down for your dream home because of the type of financing you’re using, talk with your real estate agent about how to make a competitive, attractive offer. Your agent will be the expert on the housing market in your area and will know how to strategize your offer.
How much will this really cost me?
Buying a fixer-upper can be a great opportunity for a buyer to get the exact home they want at an affordable price. However, don’t let the low price tag blind you to reality. You’ll likely have to drop a significant amount of money on repairs and renovations.
You can prevent having home buyer’s remorse by doing some research ahead of time and figuring out how much money you’ll need to budget for renovations. Don’t just assume you’ll buy materials on the cheap and do it all yourself. Home improvement shows may make fixer-upper jobs look easy, but not everything can be DIY-ed.
Get estimates for how much each project will cost, including the cost of any permits you’ll need. Once you’ve calculated the cost of everything, add it to the price of the house. That’s your actual cost.
Be sure to go over our new homeowner financial checklist so that you continue to keep your finances in their best possible health.
Molly Grace is a staff writer for the Quicken Loans Zing Blog where she writes about mortgages, personal finance, and homeownership. She has a B.A. in journalism from Indiana University. You can follow her on Twitter @themollygrace.
Haven Life Insurance Agency does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, accounting or real estate advice. You should consult your own tax, legal, accounting advisors or appropriate professionals before engaging in any transaction.