Just as there is more to owning a pet than the initial money needed to buy a dog or cat (the accessories, food, emergency vet visits, even the carpet that Fluffy uses as a scratching post), there’s more to buying a house than having a down payment.
Before you buy a home, you’ll need to consider the changes that will occur when you become a homeowner, and calculate how they’ll affect your budget and lifestyle. From neighborhood amenities to home warranties, here are seven considerations before you start perusing Charlotte, NC, real estate listings.
1. Figure out what to spend
Don’t necessarily buy what you can afford — at the top of your approved home loan. You need to plan for ongoing homeowner expenses, such as property taxes, homeowners’ insurance, and homeowner association dues. These fees are not necessarily static; they can increase, and you need to be prepared to pay them for as long as you live in the house. Try to keep your mortgage payments to no more than 28% of your salary so that you can handle extra fees that come with homeownership.
2. Research available loan programs
Check HUD.gov for state programs you might qualify for. In Maryland, for example, Community Development Administration loans are available to make homes more affordable for buyers like Kelsey Casselbury of Crofton, MD. Her only requirement was to take eight hours of a homeowner class. She also received $5,000 for closing costs, repayable upon sale of the home.
3. Scout out the neighborhood
Choose a neighborhood that matches your lifestyle. If you have kids, pick a house in a good school district. If you want to walk to restaurants and shopping, you typically need to live in a more established, historic area. Or if you want more space and a new-construction home, you might need to live farther from the city center. Listen to the neighbors: If you hear barking dogs and screaming kids, just remember, they’re staying.
4. Understand the art of negotiation
Some sellers might take lower than asking price if they believe you will treasure the house as much as they did. Debbie Kemp of Kansas City, MO, offered $2,000 below the asking price but insisted that she would keep a religious statue in place on the outside of the house. The statue was meaningful to the seller, and the seller rejected a higher offer from a buyer who asked that the statue be removed.
5. Budget for furniture
Unless you’re happy to picnic every night on a blanket spread out on the floor (with the neighbors watching through your naked windows), you’ll need to buy furniture and other home furnishings. The cost of furniture is nothing to sneeze at: Real estate professionals estimate it could run you 25% of the cost of the home.
6. Look into home-warranty plans
Rich Leffler, author of the book Insider Basics for the First-Time Home Buyer!, says buyers should always purchase a home warranty. “It’s like having a bumper-to-bumper warranty on your car.”
Home warranties, which are separate from homeowners’ insurance and purchased from home-warranty companies, usually cost a few hundred dollars annually and cover the heating system, air conditioning, water heater, and appliances. Leffler also recommends that homeowners start putting away $100 a month in a “home fund” as soon as they move in, which they can use to pay for repairs after the warranty expires.
7. Decide how long you’ll stay
Unless you know you’re buying your dream home, consider the cost of eventually moving out. If you don’t stay in the home for at least five years, you probably will not have enough equity built up to cover fees such as closing costs and a home inspection.