A Handy Step-by-Step Guide to Buying a Home With No Regrets
The excitement of shopping for a home can quickly give way to frustration and despair – especially if buyers aren't prepared with a basic checklist to keep them on track. For example, one recent study cited by RealTrends showed that 60% of homebuyers had some regret after rushing into a home purchase. The steps below can keep you focused and cover all your bases on the path to homeownership. Read on for some helpful, time-tested insights from Dan Rhoads.
Define Your Ideal Home
Consider your needs to decide what options and amenities are truly non-negotiable. For instance, determine the size and property type to accommodate a changing family or home business. Can you take on the costs of an older home that only needs some TLC, or are you better off spending more for a property in top-notch condition so you can focus on earning money to pay for it? Factor in your commute and if the school district is suitable for your kids.
Consider a Home Warranty
Next, schedule a home inspection. Since no home is perfect, expect to find a few red flags on the report. Verify if the current homeowner has warranties to cover future issues, and check the fine print to understand what isn't covered. Especially in today’s digital age, devote some time to evaluating electronics coverage to cover computers, TVs, tablets, gaming systems, and more. When reviewing plans to suit different needs and budgets, learn everything you can about the pros and cons and costs of different home warranty policies in your state.
Understand Your Budget
Plan to stay in your home for at least five years to make your purchase financially sound. Online mortgage calculators can help you apply the 28/36 rule so that you don't find yourself overwhelmed with debt. Your household expenses shouldn't be more than 28% of monthly income before taxes, and your debt should be less than 36% of your monthly income. Remember to plan for closing costs of 1-3% of the home price due at signing.
Figure Out How to Finance
The homebuying process can be complex, so don’t be afraid to get help to explore which loans you pre-qualify for. Government-assistance loans can allow low down payments and help folks purchase with less than stellar credit. However, less than a 20% down payment means you'll likely pay private mortgage insurance (PMI). You get the best loan rates and terms with excellent credit and 20% down, but not everyone has such fortunate circumstances.
Make a Respectable Offer
In competitive markets, buyers must be ready to make a desirable offer. Avoid insulting the seller with a ridiculously low bid. Make your offer as simple and uncomplicated as possible, and keep your contingencies to a minimum. Prepare to accept reasonable contingencies from the seller. Attempt to make a personal connection with the seller with a letter or video message.
A home purchase is one of your most important investments. Define your ideal home, establish your budget, shop for mortgages, make an offer, and consider purchasing a home warranty. Take each step wisely with due diligence to make your acquisition go smoothly.
Dan Rhoads is here to help you make the most of your retirement. Don’t hesitate to reach out if you have any questions!
Disclosures
Investment advisory and financial planning services are offered through Simplicity Wealth, LLC, an SEC-registered investment adviser. SEC registration does not constitute an endorsement of the firm nor does it indicate that the adviser has attained a particular level of skill or ability. Insurance, Consulting and Education services offered through Rhoads Agency. Rhoads Agency is a separate and unaffiliated entity from Simplicity Wealth. This information is provided as general information and is not intended to be specific financial guidance. Before you make any decisions regarding your personal financial situation, you should consult a financial or tax professional to discuss your individual circumstances and objectives. The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed.
References
“Understanding the recent rash of homebuyer remorse,” RealTrends. Published online March 10,2022, By Luke Babich. https://www.realtrends.com/articles/understanding-the-recent-rash-of-homebuyer-remorse/
“The unexpected truth about buying a fixer-upper,” Medium. Published in Home Base by Ribbon August 4, 2020. https://medium.com/ribbon-home/the-unexpected-truth-about-buying-a-fixer-upper-6cb6e9a9532f
“Allstate Electronics Protection Plan,” American Home Shield. Accessed October 15, 2024. https://www.ahs.com/our-coverage/additional-coverage/electronics/
“How long should you live in your house before selling it? Experts weigh in,” Livabl. Accessed October 15, 2024. https://www.livabl.com/articles/guides/how-long-should-you-live-in-your-house-before-selling
“What is the 28/36 rule and how can it help you get approved for a mortgage?,” CNBC. Updated June 5, 2024. By Jasmin Suknanan. https://www.cnbc.com/select/what-is-the-28-36-rule-for-buying-a-home/
“Understand the different kinds of loans available,” Consumer Financial Protection Bureau. Accessed October 15, 2024. https://www.consumerfinance.gov/owning-a-home/explore/understand-the-different-kinds-of-loans-available/
“Homebuyer‘ Love Letters’ May Stir Bias. (But They Often Work.),” Stateline. Published October 15, 2021 by Elaine S. Povich. https://stateline.org/2021/10/15/homebuyer-love-letters-may-stir-bias-but-they-often-work/
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