Buying a home is a very big investment, and is likely to be the single biggest venture for many. Many people spend years saving for a home, and spend many more years repaying their mortgage. Hence, they think a lot before investing in a home. But buying a home is a wonderful investment, given the increasing prices of real estate.
Prices of most homes tend to appreciate by at least 4 to 5 percent in a year. There would also be income tax savings through tax deductions on the mortgage payments and property taxes. The monthly housing costs would also remain stable with fixed-rate mortgages (as compared to the rent of a house, which would have to be increased every year). There are also many other advantages such as forced savings, not to mention the freedom and independence that your own house would give.
There are various aspects to be considered before buying a home. From a buyer’s point of view, they are: the current level of income, the continuity in the income, your credit history, the money required for down payment and closing costs, and the number of years the buyer would be spending in the house. From the property point of view, the most important factor is the price of the house. The location of the house, the kind of house (new/ resale/ build new), its probable resale value and mortgage available are some factors to be considered.
Apart from these, also take into consideration the general market conditions, as these will affect the interest rates, extent of mortgage available, price of the house, likely appreciation of the price of the house, and even income and saving potential. Before buying the house, also check the kind of disclosures the seller is supposed to give you, the forms to be filled, home inspections, the real estate agent’s title search services, who is the settlement agent, and the other costs involved in the process.
Buying a house is a step-by-step process lasting over several months. The first step is to determine your financial position. This includes your credit reports, how you manage your finances, any past debts or mortgages, and other aspects. Find a good lender or mortgage company, as they would take care of several things like determining how much mortgage you can get and what kind of a house you can afford, and giving a pre-approval for a mortgage. Understand the real estate market, hunt for houses, and decide on the best house. The next steps may include making the offer of purchase, the mortgage approval, taking a look at the moving options, making address changes, arranging for property insurance, and finally, moving in. You need to understand various options such as home warranties, home insurance, and others.
There would be several other up-front costs involved, such as mortgage loan insurance application fee and premium, appraisal fee, deposit, down payment, home inspection fee, land registration fee, property insurance, title insurance, legal fees and disbursements. Some other fees may include pre-paid property taxes or utility bills, survey or certification of location cost, water quality inspection, and Estoppels’ certificate fee. The cost may also increase if the house is equipped with any other equipment, such as air conditioners, gardening equipment, dehumidifiers, snow clearing equipment and others. Some houses may require renovations and repairs, window treatments, and decorations. You would need a real-estate agent, a mortgage lender or broker, a lawyer, a home inspector, an insurance broker, an appraiser, a land surveyor, and a builder/contractor (if you are building or rebuilding the house).
Real estate agents, newspaper classifieds, the Internet, “for sale” signs, new developmental sites, and friends and family are some of the most common sources for locating a home to buy. Beware of some common mistakes while buying a house: over-buying, not using an agent, not comparing mortgages, not getting mortgage pre-approval, waiting for the “right” house, or cutting down on the process to save time. This would be a disaster.
