10 Things You Need to Do When Buying A Home

Your biggest investment in a lifetime will probably be your home. A study reveals, in fact, that the average American homeowner has 40% of their assets invested in their home.

1. Buy for the long term

A house is a substantial investment, also a primary pillar in your stability. According to a report in 2017, the majority of Americans who had to sell their houses last year had lived in their home for 10 years or more before selling.

Some are planning to remain in the same home for at least five years to come. Nearly half (46%) of all homeowners are like me. It should be recalled that I would like to live in a home I can live in for at least five years, with a structure and features tailor-made to my needs both now and in the future.

2. Invest in your home to benefit your life, not your wealth.

Your house is more than an investment in the money you spend there; it's your room, your kitchen, your dining-room, where you relax with friends and enjoy time with your family . Distribution of all personal appointments takes place at home — it’s where your life happens.

It's difficult to predict the housing market to buy a main residence merely because it is something you believe will return big profits periodically. You should visualize living in a home for a considerable amount of time regardless of what the market does as a result of its unpredictability, so you can base your purchase decision on a house that presents the ideal opportunity for you and helps you live the lifestyle you really want.

3. Think about what is important to you.

The problem today's housing market faces is a shortage of homes for sale, with 10% fewer houses on the market in November 2017 than in November 2016. So, focus on finding a home you can afford that meets your needs but don't get distracted by shiny features that might break your budget.

Nice-to-have features commonly drive up the cost of those items that you don't particularly care about in the years after you've entered them. Jot down all the basic needs you want in your new home and your desired location. Stick to finding a home that meets these requirements, without purchasing unnecessary stuff that adds up.

4. Set a budget and adhere to it.

It's important to establish a budget timely ideally before you even start working on home listings. In today's market, especially in the more competitive marketplaces, it is very easy to go over your budget — 29% of buyers who bought last year did. The most common reason for overspending? Location.

Data indicates that urban shoppers are 4 times more likely to go above budget (42%) than suburban (25%) or rural (20%) buyers. There's nothing really wrong with that. A local school in a good area is an advantage, and psychologists say that a short commute makes your life easier. However, do not get overconfident about your area and your potential. Be realistic about what's important to you, such as the size of the place, home repairs, or a different neighborhood.

5. Make a 20% down payment.

If you can pay for it, go for a 20% down payment. These are 3 reasons as to why it's ideal:

• Installment buyers who typically put less than 20% down are frequently billed PMI, that is significantly less demanding on their finances than it used to be, given today's low mortgage rates. Monthly mortgage payments for buyers with PMI are lower than monthly rental payments in several markets but still.
• Those who put more money down upfront typically make fewer offers and, on average, buy faster than those who put less down. A study discovered that buyers with higher down payments make 1.9 offers on average, compared to 2.4 offers for buyers with lower down payments (once controlling for market conditions).
• A higher down payment reduces your financial risk. You don't want to owe more money in the housing market than your house is worth if local markets fall when you need to sell your property.

6. Secure at least six-month household funds.

Even though a down payment is significant, it's also important to set aside money for the early months of mortgage.

This reserve must cover half a year of living expenses in the event that you get sick, face an unanticipated expenditure, or lose your source of income. A strategic reserve cannot just save you from financial hardship in the event of an emergency but also provide you with the peace of mind of knowing you can pay for your next expense. When we began building a strategic reserve, my wife and I finally felt ready for our future. Without it, we feel like we are constantly at financial risk.

7. Stick to a fixed-rate mortgage that is pre-approved.

The pre-approval process entails accumulating all your paperwork, documenting your income and credit, and understanding the different loan alternatives on offer. It's a hassle, but calculating your eligibility ahead of time saves you time later on. Being pre-approved also means you're a reliable buyer with a solid financial standing. Most importantly, knowing your financial conditions enables you to make a smarter buying decision.

There are even various home loan types, and the key is to review each one to discover which is ideal for your circumstances and needs. Those monotonous 30-year and 15-year mortgages provide huge advantages. The biggest is locking in your mortgage interest rate. In a nutshell: A 30-year fixed mortgage has a 30-year interest rate that stays the same; a 15-year fixed mortgage has that same interest rate.

These are generally lower rates, but the first payment and the total sum of the loan are higher, because you're paying it off in half the time. Standard fixed-rate mortgages let you monitor your spending regularly because you've already understood the terms of your payment for the long term. They are simple and easily understood, and the current interest rates are affordable.

A final advantage is that they don't tempt you with a reduced upfront payment in order to purchase more property than you can afford.

8. Compare different mortgage providers before settling on one.

Given this is the largest purchase we'll ever make, most buyers do not compare mortgage rates when purchasing a house (they simply go with either only a single lender or follow little to no guidelines at all).

I never did this. Consequently, this saved me a considerable amount of agitation and hassle, but it also cost me $40 or $50 every month, for years. The difference between half a percentage point in your mortgage rate adds up over time, ending up being worth thousands of dollars. Go with the provider that best fits your financial needs, and not just the first one you ask about.

The three most important determinants are that the lender makes lending programs that are responsive to the client's needs (76%), has the most competitive fees (74%) and excels at quick closings (63%).

9. Do not spend more than one-third of your net income.

It's much better to regret spending too little on your home than spending too much. At least one third of your after-tax income is a safe starting point. This isn't always feasible if you live somewhere like San Francisco or New York, but it's still a good yardstick for where to be.

10. Be willing to bail if necessary.

Buying a house is a time-consuming, stressful but ultimately rewarding experience if you make a satisfying purchase one day. But, it is crucial to manage your expectations if you don't find the perfect home immediately.

Always look for other sellers when the house doesn't meet your standards, an essential evaluation isn't completed nor passed or the timeline is off, and you aren't ready to pay the home's appraised worth. Hold fast to your list of must-haves, respect your budget, and don't let it mean an ideal house. It isn't a shame to pass up a particular residence. Similarly, consider whether your desire for a particular house can be satisfied ten years from now.