14 Things to Consider When Buying a House

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Are you about to be a first time home buyer? Our checklist will guide you on what to consider when buying a house for the first time.

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Are you wondering what to consider when buying a house?

As the largest and most diverse demographic group today, millennials are reaching the life stages that usually motivate people to purchase homes – marriage and having children.

On the other hand, most have heard stories of the struggle and frustration in the real estate market as they were growing up, which turned them off the idea of homeownership and kept them renting.

However, if you are in your 20s or 30s and are considering buying a home, there is no reason to wait. These seven tips should show you the way and avoid your concern about what to consider when buying a house.

What To Consider Before Buying A House

Many people are hesitant to buy a home because they do not know what to expect. If you're considering buying a property, be sure to ask yourself some key questions to determine whether this is the right time for you. Whether you're a first-time buyer or an experienced investor, here are some of the most crucial factors to consider when purchasing a home.

  • Credit Score
  • Debt to Income Ratio
  • Duration of stay
  • Job security
  • Down payment
  • Emotional state
  • Local market indicators
  • Mortgage rates
  • Supply and demand

Credit Score

Your credit score is one of the biggest factors in what your interest and loan products you will eligible for. Definitely, know your score before you ever try to get a mortgage. If your score is under 700 then you'll need to spend some time repairing it. A score over 750 which leads to a lower interest rate will save you tens of thousands of dollars over the life of your mortgage. See how to raise your credit score to get better loan terms.

Debt to Income Ratio

The debt to income ratio is a metric used by a mortgage lender to assess whether you can afford to make the property's monthly payments. The FHA recommends a debt-to-income ratio of 43 percent as desirable. This implies that all of your housing-related costs each month do not exceed 43% of your monthly income. Keep in mind that if your monthly expenditures exceed this amount, you will have a harder time obtaining a mortgage for the property.

Duration Of Stay

The length of time you intend to stay in the property is one of the most crucial aspects to consider when purchasing. In other words, does the length of stay make it more cost-effective to buy than to rent?

Of course, there is no simple solution to such a general question. Each market has its own characteristics that must be considered before determining whether or not purchasing is the proper option.

However, whether or not the time you plan to spend at home is justified is very debatable. On average, it takes four to seven years to break even on a house after purchase where you have enough appreciation to repay for the transaction and ownership costs.

It's very unlikely that you'll make more money renting than selling a house in two years and thinking it will be cheaper to rent.

Job Security

The development of the economy might boost employer optimism. That does not, however, negate the fact that those who are employed are worried about their job security.

Yes, it's true. We are still recovering from one of the worst recessions in history. There is a lot of anxiety about it. Having said that, the last thing you want to worry about when purchasing a house is your job security. Uncertainty will almost certainly kill any chance of buying a home.

There is no greater disappointment than buying a house and discovering that you are out of work shortly after. So, before making a 30-year mortgage commitment, make sure you're confident in your employment status.

Down Payment

One of the most significant roadblocks for potential buyers is a lack of cash. Millennials, in particular, have had difficulty saving up a large sum of money for a downpayment.

Not only did the millennial generation graduate from college during one of the worst economic downturns in American history, but they are also weighed down by student loan debt. Underwritings have gotten more difficult to deal with, and renting has made it nearly impossible to save up for a down payment.

Both Fannie Mae and Freddie Mac have announced that they will support loans with down payments as low as three percent in an effort to make down payments more “accessible.”

Furthermore, the Federal Housing Administration (FHA) wants to reduce mortgage insurance premiums owed. Buying a house might become considerably more affordable as a result of this change.

Financial experts agree that young people need to look at the bigger picture if they want to see their savings accumulate. Rather than giving up their ‘avocado sandwich and latte’ as Australian millionaire Tom Gurner suggested, they need to consider more effective steps, like lowering the rent they are paying, or even moving back with their parents for a couple of years.

Selling your car in favor of public transportation, or at least downsizing to one car for couples is another consideration to save for the home down payment.

Emotional Status

It may appear to be straightforward, but the emotional condition of a buyer is crucial throughout the process of acquiring a house. That said, homeownership isn't for everyone. Purchasing a home is a major commitment, and not everyone is prepared to make that type of investment. Some people still want to explore the world or pursue their ideal careers.

Even more significantly, having a house comes with additional obligations that many people are unwilling to take on. When you move from renting to owning, your life undergoes a significant transformation. It's your duty to repair flaws rather than the landlords.

Local Market Indicators

One of the most aggravating aspects of purchasing a home is something you have no control over, which is the local market. You may not even be given any alternatives. The market you're looking for might not have any homes in your price range or the appropriate place.

Perhaps the most important thing to consider when determining whether or not to purchase is what your home might be worth one year from now. Some market values, on the other hand, determine if buying is even a feasible choice. While it is cheaper to own than to rent in certain areas, there are others where renting makes sense. It all depends on owning in the right market.

Mortgage Rates

In 2022, most people anticipate mortgage and interest rates to rise as the Federal Reserve tightens its monetary strategy and reduces its balance sheet. This prediction has been circulating through the real estate sector since late 2016, making it impossible to tell if or when a major increase will occur.

Mortgage rates have fluctuated between 2.8 and 3.5 percent over the last year, a figure that is essentially meaningless. Some experts believe that by the second half of 2025, mortgage rates will rise to 5%, but there has been no official verification one way or the other. One thing is certain: buying a home in early 2021 will guarantee a low-interest rate.

Supply And Demand

Many hopeful purchasers find it difficult to acquire within their means as home values have risen. Even current homeowners are choosing not to purchase more modern, bigger, and better homes for the same reason. This makes things even more difficult for first-time buyers because the number of beginning houses is less than ever before.

With low wages and high rent increases, as well as stagnant salaries for many, the mixture of strong demand and limited supply results in a situation in which there is a lot of demand but not enough homes. While first-time home buyers may have difficulty now, investors who own passive income properties should profit from the current market environment.

14 Features To Consider When Buying A House

There are a number of features to consider before making an offer on a house. Each homebuyer is unique, so finding the ideal property for you will necessitate that you think about what you want. Consider these elements while deciding whether or not to purchase a home:

  1. Your network
  2. Trusted professional
  3. Long-term vs. immediate costs
  4. Location
  5. Size
  6. Bedrooms
  7. Bathrooms
  8. Kitchen layout
  9. Appliances
  10. Age of the house
  11. Maintenance
  12. Seller's incentive
  13. Purchase price
  14. Shop around

1. Your network

Don’t hesitate to ask your network, more importantly,  your elders – the people who care about you or even your older colleagues and mentors from work and college. They have probably gone through the same situation and their experience can be a great resource for you.

Buying your first house makes for a steep learning curve, which means that you’ll need all the help you can get.

In addition, some of these people may even be able to help you with your down payment, which in turn can get you more favorable loan terms.

2. Trusted professional

Although tips from more experienced friends and family members are helpful, they are nothing compared to what realtors can tell you. Some of them have decades of experience in the industry, meaning that they know what to do and what not to do when buying a house. Aside from guiding you through the entire purchasing process, a reliable buyer’s agent in Canberra can save you a lot of money and time.

3. Long-term vs. immediate costs

From applying for a mortgage, getting mortgage insurance and home inspections, to hiring an attorney, there are many fees that can add up quickly. Keep in mind that these are the costs before you even become a homeowner. Many inexperienced buyers fail to budget all the long-term expenditures properly and end up struggling to pay their bills. You should know each of these costs and factor them into your home buying calculation.

Real estate is a long-term investment. The market will have its ups and downs, but if your financial situation is solid and your plans realistic, buying will eventually show to be more rewarding than renting.

4. Location

The location and neighborhood not only affect the value but also the convenience of reselling your property when the time comes.

You may fall in love with a specific home because of a lovely garden or the arrangement of the rooms, but if it’s located on a busy transit route, the next buyer may not see the perks that made you buy it in the first place. You can find many professional tips on how to choose a neighborhood online.

5. Size

Size of the property you're buying will impact a number of aspects of your home's usage and potential, so keep that in mind before making your purchase. The shape of the lot will have an influence on your seclusion, and if you want a particular type of lawn or driveway length, you should think about the lot form.

6. Bedrooms

The necessary number of bedrooms for each family will differ. If you intend to add to your family in the future, consider a home with more bedrooms than you require now. Extra rooms are useful for families who want to have visitors or may be used as workspace. Make careful consideration of how you'll utilize bedroom space when making an informed selection in the near and long term.

7. Bathrooms

The number of bathrooms in a house might be crucial to many people. Consider how many people will use each restroom – including guests. Would you want to include both bathtubs and showers in each bathroom? Is the size of each bathroom significant to you? Is it possible to add a second bathroom if necessary? While contemplating acquiring a property, consider

8. Kitchen layout

The layout of the kitchen has an impact on how well the area is used. If you spend a lot of time in the kitchen, a more open design might be worth considering. If you don't cook often, a tiny or closed kitchen may be enough. Take some time to think about how important your kitchen space is for you and your family to help you decide.

9. Appliances

It might be difficult to replace your home appliances. Consider your preferences for home appliances as well as the age of the current ones in your household. Some homebuyers may feel compelled to buy new appliances, while others see them as a benefit.

10. Age of the house

If you are not interested in upgrading, some houses that meet all of your criteria might have been built many decades ago. When purchasing a property, think about the age of the home. An older home may have appeal and charm, but it may also require additional renovations, repairs, and upgrades.

If you're seeking for an older property, be sure you can afford the time and money necessary for renovations. When purchasing a home that is older, keep in mind the building codes. Building regulations may have altered throughout the years, so having a basic knowledge of past and present rules can assist you in comprehending the condition of the house.

11. Maintenance

Include the cost of keeping up your home in your budget. Some tasks may be simple to finish. Other projects might need more time and money. The age and condition of the property at the time of purchase will affect its repair and maintenance costs.

12. Seller’s incentive

Another aspect to consider when purchasing a home is the fact that some sellers are more enthused than others in terms of whether or not their property sells. It's typical for certain people to put their houses on the market, yet they aren't seeking for a quick sale.

The previous owners of these houses are delighted to stay put for the time being. In practice, there may be little room for negotiation. On the other hand, a seller may be highly determined. This might be due to a house sale, a sudden need to relocate such as a job relocation, or someone wanting to pay off one of their mortgages with the sale of their homes.

13. Purchase price

Of course, the purchase price of your new house will have a significant role in whether or not you should buy one. Make a spending plan that is appropriate for you, and keep to it. Take into account all expenses before making a decision that meets your financial needs and objectives.

14. Shop around

Shopping around for the best mortgage rate is an essential step for anyone looking to purchase a home or refinance their current mortgage. The difference between a great rate and an average one can translate to tens of thousands of dollars over the life of a loan.

Start by preparing yourself with a thorough understanding of your credit score and financial health, as these factors significantly influence the rates lenders will offer. It's beneficial to obtain a pre-approval, but make sure it doesn’t involve a hard credit check as this can impact your score.

Reach out to multiple lenders, including banks, credit unions, and online mortgage brokers. Each may offer different rates and terms based on their criteria and current loan offerings. Additionally, consider the various loan types (fixed, adjustable, etc.) and their respective pros and cons. Look beyond just the interest rate; consider fees, points, and other costs associated with the mortgage.

Always review the annual percentage rate (APR) which gives a more holistic view of the loan's true cost. Remember, personal rapport and customer service are also essential. The lowest rate might come with hidden fees or poor service, so be diligent in your research and don't be afraid to negotiate with lenders.

As you can attest, knowing what to do before buying a home is critical.

Hopefully, you enjoyed this new house checklist of what to consider when buying a house. Leave a comment if you have any questions!

About the author

Cooper Klein
Cooper Klein is an experienced entrepreneur with a degree in Marketing, based in Canberra, New South Wales, Australia. He’s interested in business, real estate, sports, as well as the latest tech trends. In order to spend more time with his amazing family, two fluffy dogs, and numerous sci-fi books Cooper decided to take a break from his job as a marketing manager at a tech startup, and he’s currently working from home as a blogger and a business consultant. His motto is: "Stop being afraid of what could go wrong and start being positive about what could go right."