Did you know that over 250,000 people lose their homes to foreclosure almost every 90 days? Homeownership is an awesome responsibility. The reality is that most people are wholly unprepared for homeownership even before they sign the mortgage papers. There are questions when buying a home you must ask yourself before finalizing the deal.
These include:
- Do I Have the Budget to Buy and Maintain a Home?
- Can I Pay For Closing Costs?
- Is Your Home Located in a Flood Plain Area?
- Why is the Seller Selling?
- Do I Have Enough Time to Physically Maintain a Home?
- Do I need a real estate agent?
There are a lot of things you must consider before buying a home.
Buying a home is a contractual obligation. You should understand the legal technicalities of what you’re getting yourself into. Consult a lawyer and/or a good real estate agent before you consider buying a home.
Here are some questions you should ask during the house-hunting process.
Do I Have the Budget to Buy and Maintain a Home?
The only thing that may be harder than buying your first home is keeping it. But, let’s discuss this issue one question at a time.
Of the major questions when buying a home, you must ask yourself is, “Can I afford to buy this home?”
The average price of a new home is currently over $309,000.
Are you budgeting to buy the home you want or the home you need?
Does it make any sense to buy a home you can’t afford? Why put yourself in a position where you will get into arrears and possibly lose your home?
Have you saved enough money to qualify for a mortgage and pay a down payment?
Are you gainfully employed and plan to stay employed for the foreseeable future?
A house doesn’t pay for itself. You could be paying a mortgage for 20 or 30 years.
Make sure you have the budget to buy a house and pay the mortgage on time.
Can I Pay For Closing Costs?
There are some questions when buying a home that people never think to ask because they just don’t know to ask.
Case in point – can you pay all ancillary closing costs to finalize buying a house?
Paying the mortgage down payment is just the beginning of a long list of required payments to buy a house.
Closing costs are a multitude of affiliated fees that must be paid before closing the deal to buy a home.
How many closing costs fees will you need to pay? That depends on where you live, the value of the home, and local real estate law mandates.
You could pay a dozen or even dozens of closing fees. Such fees include:
- Origination fee (a fancy term for complete mortgage application opening, processing, and closing)
- Appraisal company fee
- Attorney fees
- Courier delivery fee
- Home inspection fees
- Lead paint inspection fee
- Property tax
- Surveyor’s fee
- Title search fee
Your closing costs could be the equivalent of 2% to 5% of the value of the home you’re buying.
Is Your Home Located in a Flood Plain Area?
Did you know that real estate agents or property sellers aren’t legally required to inform you that you may be buying property located in a flood plain?
Your questions when buying a home should include if your home is located in a flood plain area.
Over 25 states feature residential located near the Mississippi River or in the Gulf states. These are areas where flooding and hurricane landfalls occur more often than in other states.
Almost 4 million homes are located in flood plain states. They are also overvalued by about $34 billion.
Only about 15% of Americans ever bother with buying flood insurance for their home.
If you don’t know if you’re buying into a flood plain, you’ll end up paying a fortune in repairs after buying.
Or, going bankrupt.
Why is the Seller Selling?
In business, you don’t get what you deserve. You only get what you can negotiate.
Negotiations are powered by timely information, strategic compromise, and diplomatically trying to get more than you give away.
One of the main questions when buying a home you should ask yourself is, why is the seller selling?
If you understand why the seller is selling, you’re more likely to leverage the information in your favor during negotiations.
For example, the seller may be expanding their family and looking for a home with more space.
The seller may have lost work and needs to downsize. Or, perhaps the seller needs to relocate because an unexpected life event.
How long has the home you want to buy been on the market? The average home is on the buyer’s market for 65 to 93 days.
The longer a home is on the market, the more leverage you have to pay a price in your favor.
The point is that if you, or your agent, fully understand the seller’s motivation, the more you can use this information in your favor.
Do I Have Enough Time to Physically Maintain a Home?
A home isn’t going to take care of itself.
Things break down in a home all the time and will need repair.
Additionally, to upkeep the financial value of a home, you will need to maintain your home’s aesthetic qualities.
You will need to periodically check strategic areas in your home to look for signs of animal, pest, and insect infestation.
You will need to spend several hours every week dedicated to maintaining the integral and financial integrity of your home.
Can you sacrifice enough hours in the week, every week, to do this?
Questions When Buying a Home – Do I Need an Agent?
Buying a home can be a complicated and excessively bureaucratic experience. Not knowing what you’re doing can cost you a lot of money.
Almost 60% of homeowners wished they had better understood the fine print of their mortgages before signing.
It’s OK to admit that you don’t know what you don’t know. Consulting a real estate agent may be the best way to answers questions about buying a home.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.