As many of you know, I love and hate watching home shows on HGTV. I love them because they are interesting and I learn a lot, but I hate them because the people are so clueless sometimes. If you are one of those people and you have never bought a house before, don’t fear. I have some awesome information and tips for you that will help you have a great house buying experience.
First, let’s talk about the finances. Are you financially ready to buy a house? If you want a house bad enough, you can talk yourself into believing you are even if you are not. I want to be real with you and help you to know if you really are ready to buy a house.
- Do you have 20% to put down as a down payment? If not, you are not ready quite yet. If you do not have 20% down, you will have trouble qualifying for a good loan. But even if you get over that hurdle, you will be required to carry PMI insurance to cover the difference. For example, you want to buy a house for $200,000. You will need $ 40,000 down to avoid an additional payment of PMI. If you only put down 10%, you will add an additional $80 to your monthly payment for the life of the loan. Therefore a monthly payment of $1420 just became $1500.
- Do you have debt? Do you have a 6 month emergency fund? If you have debt, you are not ready to buy a house yet. Adding this much debt to your already existing debt is just asking for a disaster. If you are out of debt, then you will be able to cover problems which will arise in the house and they will arise even if the home is new. For this very reason, in addition to being out of debt, you need a 6 month emergency fund to cover those issues.
- Will your payment (insurance and taxes included) be less than 27% of your take home pay? If not, your payment is too high and will stress you budget. Your loan should be a fixed rate loan for 15 years and the payment no more than 27% of your take home pay. If you don’t meet this criteria, you will either have to put more money down or lower your mortgage amount.
If you buy a house and it causes you to live paycheck to paycheck and a water heater breaks or a roof begins to leak, this house will become a nightmare instead of a blessing. Be patient, write down what you need to do to buy the house with ease, and work on those goals aggressively and you will have a house that will be a blessing in no time.
Now, let’s talk about reality house buying. We all have a wish list of what we want to have. However, make sure it is really what you want and not just what is “in” right now. For example, everyone wants stainless steel appliances. But do you have any idea how hard they are to clean and keep clean? I agree they look better than white, but deal with what is there and save up and buy something like the Slate line from GE which is the look of stainless without the mess. Granite requires yearly maintenance to reseal it. Did you know that? Don’t just want something because everyone else has it. Find out what is best for you and save up to get that. You will be much happier.
Also, when you are house buying, walk into a house knowing that the home owners taste will probably be a lot different from yours. Don’t blame the seller if they have carpet and you want hardwoods because you have a dog. It is not their fault you want hardwoods. You are going to have to budget for that cost because it is your preference, not theirs. Same with granite countertops and stainless steel appliances. The value of the house is in the house, not in the accessories. And if it is going to cost too much to change, move on. Focus on what you can’t change such as location and lot size and not on what can be changed such as paint color and cosmetic issues. Those items just need to be included in your house buying budget.
And last, if you insist on buying a house with every dollar you have and cannot pay for closing costs and upgrades, do not be mad at the seller because they won’t give you these things. I hate seeing a couple whose budget is $200,000 make wise cracks because a seller won’t accept their offer of $200,000 asking them to pay closing cost when the asking price for the house is $240,000. Don’t expect the seller to give the house to you just because you want it. It has to be fair for everyone. I hear a lot “Well don’t they want to sell the house?”. Well, of course they do, but they don’t want to give it away. If the house is worth $240,000 they are not being unreasonable.
Be very realistic in your house buying process. This may mean having to wait a little while to get exactly what you want. This may mean starting small and upgrading later. This may mean buying new because you will never find the perfect house. Whatever it means, do it wisely and make sure that your new house is a blessing and never a curse.