A home is one of the most expensive things that most people will buy in their lives. It’s not a decision you want to take lightly. Get it wrong, and you could be stuck with an expensive monthly payment for more home than you need. And if you don’t buy a big enough home, you could end up with a place that you quickly outgrow.
Choosing the right home is a balancing act. It requires a careful assessment of your needs, budget, and other factors to make sure the home you buy will be a good fit, well into the future.
The following checklist will help you select a home and balance what you can afford with the space you need. Working through each of the steps will help you reach a decision you’ll be happy with.
Evaluate Your Wants vs. Needs
Wants and needs aren’t the same thing, and it’s important to know the difference while looking for a home. A want is something you desire but can live without, such as a swimming pool or a home theater. A need is something you can’t live without, like having three bedrooms or living close to your job.
Before you begin your search for the ideal home, make a separate list of your desires and needs. A house that meets all of your needs but not all of your wants may still be worth considering if the market for homes is tight.
Determine Your Budget
How much home can you afford?
Many people try to buy as much house as possible. Your home is an investment, after all, and it will most likely increase in value over the years.
But there are some things to consider with a large home that can negatively affect your budget – including the cost of ownership. Buying a large home on the edge of your budget could result in financial hardship if something unexpected happens, such as the loss of a job or an expensive repair.
Large homes cost more to heat and cool than smaller homes. They also cost more to maintain. Most homeowners spend anywhere from 1% to 4% of their home’s value on repairs and improvements each year. That’s not a small sum of money. If you buy a $300,000 home, for example, your annual maintenance expense could be between $3,000 and $12,000.
Bigger isn’t always better, and smaller homes are sometimes the smart financial choice. When considering your budget for a home, narrowing your options to homes that fall within a range may prevent you from buying more home than you can afford.
Consider the Term of the Mortgage
The term of your mortgage is another important consideration when budgeting for a home. Interest is the money you pay to a lender for the use of the money you borrow. The longer your mortgage, the more money you will pay in interest.
With a 30-year mortgage, your monthly payments will be much lower than they would be with a 15- or 20-year mortgage. However, you will end up paying much more in interest over the life of the loan. Although you may not be able to afford as much home with a 15-year mortgage, you will pay much less in interest.
The savings can be significant. Online mortgage calculators can help you see how much you can save in interest on a home you are considering by switching from a 30- to a 15-year loan.
Compare Different Neighborhoods
Real estate prices can vary significantly from one neighborhood to the next. Be sure to ask your real estate agent about the average price per square foot for homes in different areas. By choosing an affordable neighborhood, you may be able to buy more home for your money than in other places.
It’s also important to carefully evaluate each neighborhood before you choose a home. Consider making a written list of the things you are looking for in a community. Then drive through each area without your real estate agent. Take your time and evaluate them based on your selected criteria. A few things to consider include:
- Is it close to amenities?
- What is the potential for the property to increase in value?
- Is it a safe community?
- Is it close to work or school?
- Is it in a flood zone?
This process will help you to rule out neighborhoods that don’t fit your needs. You can then tell your real estate agent to concentrate on the areas you like.
Visit and Evaluate Homes
The next step in the home selection process is to visit homes that meet your needs and are within your budget. Your real estate agent will make appointments for you to visit each home. In addition to the criteria you previously selected, a few extra things to consider include:
- Is it move-in ready, or will it need significant repairs?
- Does it have a private outdoor space?
- Do you like the style, floor plan, and layout?
- Does it have good curb appeal?
It’s essential to keep in mind that no home will be perfect, not even new construction. All homes will most likely have minor cosmetic issues that can be easily changed, like repainting rooms, redoing the landscaping, changing fixtures and hardware, and other things.
Instead of focusing on inexpensive cosmetic issues, consider the overall home instead. If it meets your criteria, keep it on your list.
Choose a Home
By now, you should have found several homes that are in neighborhoods you like, within your budget, and meet your needs. The challenge now is to select the best one and prepare your offer.
When making your final decision, don’t forget that bigger isn’t always better. Overall, smaller homes are more affordable to own, and you will pay less each year in property taxes. Buying a smaller home doesn’t mean you have to make any sacrifices. There are ways you can maximize the space. For instance, remodeling a basement or building an addition can help turn the house into the home of your dreams.
Pre-Qualify for a Mortgage Today
Pre-qualifying for a mortgage officially starts the mortgage application process and is the first step in buying a home. When you consult with a mortgage loan officer, you’ll find out how much the lender will loan you for a home. You can then start looking at potential homes while your mortgage application is being processed for final approval.
Contact one of our mortgage loan officers today to learn more about our great interest rates and home loan options: