Buying a house is often an exciting, stressful and overwhelming time. Deciding to take the leap into homeownership is without a doubt, a big decision. A decision that requires a lot of thought, time and consideration of the pros and cons. Before you make an offer, sign the papers and get the keys, be sure to examine your specific situation. Here’s what to ask when buying a house.
1. How much can I afford?
This is one of the first things to ask when buying a house. To identify your budget, you have to take a hard look at your personal finances. There are many factors that should be considered. Assessing your income, monthly expenses, credit rating, down payment and the estimated interest rate you’ll pay will help you determine how much you can afford. Our house calculator can help you determine how big a mortgage you may qualify for. Take a closer look at these factors.
- Income – If your or your family’s income was reduced, would you be able to make your house payment and still cover your other expenses?
- Monthly Expenses – Owning a home often comes with added monthly expenses, both expected and unexpected. Before you purchase your new home, take a close look at your spending. You probably have the typical monthly expenses on top of your house payment – phone, food, transportation, insurance premiums (auto, medical, dental, vision), electricity, water, dependent care, and credit card payments – these costs need to be considered when determining how much you can afford to put toward a house payment.
- Personal debt – When thinking about buying a home, be sure to consider the amount of your other debt – school loans, auto loans and credit card debt.
- Credit score – Your credit score is a major factor lenders consider during the approval process. It’s also a major factor for determining the interest rate of your loan. Consumers with a high credit score often receive lower interest rates. To check for accuracy and any errors, federal law allows you to receive a free annual credit report from all three credit reporting agencies. Bankrate.com suggests you check your credit report a year or so in advance of purchasing a home to allow yourself some time to improve if needed.
- Down payment –The amount of your down payment affects how much you have to borrow. A larger down payment will lower your monthly payment. Additionally, if you can put at least 20 percent down you won’t be required to purchase mortgage insurance.
2. How much will my property taxes be?
This is one of the most important questions to ask before making an offer on a house. To avoid the shock and surprise of property taxes, it is a good idea to ask what the estimated taxes will be on the property before purchasing. Do your research ahead of time to prevent being surprised by any rate increases.
3. What other expenses come with buying and owning a home?
Depending on where you live and the type of property you purchase, you may have more upfront expenses to maintain, furnish and secure your home. Expenses may include:
- Maintenance equipment – Snow blower, lawnmower, sprinkler system and other maintenance tools.
- Furniture – If you’re moving from an apartment or a smaller home, you may need more furniture to make the larger space look good. This can become a costly expense, if you’re not prepared.
- Appliances – Whether you’re buying a brand new house without appliances or need to update existing appliances, these can add a significant amount to your initial costs of homeownership.
- Moving costs – Whether you’re moving across town or across the country, the expense of moving should be factored into buying a new home.
- Homeowner’s Association (HOA) fees – When searching for a house, be sure to ask your realtor if there are any HOA fees.
- Closing fees – The cost to close on a home can add up quickly when you think about all of the different fees. Fees may include a home inspection, realtor/lawyer fees, title search, pest inspection, appraisal, home warranty and a loan origination fee. Your lender may also require you to set up an escrow account to pay for ongoing property expenses.
4. Do I have an emergency fund?
In contrast to renting, when you own a home you’re responsible for making needed repairs and updates. A repair, minor or major, may leave you strapped for cash, if don’t have money set aside for those unexpected expenses.
5. How long am I planning to stay in the home?
It’s important to consider any factors – relocating for work, expanding your family, getting married – that may cause you to move sooner than later. It generally takes five years or more to simply break even on the costs of buying, owning and selling a home. Thinking about how long you’ll be in the house, will also help you determine the type and size of house you will need, neighborhood location and other factors that could be planned for.
6. Can I still afford to save?
Of all the questions to ask when buying a home, this is the one most people forget. It’s easy to ask how much you can spend — it’s harder to ask how much you can save when you’re a homeowner. As you determine how much you can afford, don’t forget to factor in your savings goals. How much do you want to save for retirement, college funds, vacation and personal savings? Not being able to save for these things could cause a lot of stress later on.
7. What are my rights as a borrower?
It’s important to know what your rights are as a mortgage borrower. The Consumer Financial Protection Bureau’s Know Before You Owe initiative is crafted to provide borrowers with a better understanding of available loan options, help them shop for the best mortgage, and discover any surprises before closing.
8. What type of insurance coverage will I need?
Protecting things that matter most to you, including a new home means having the right coverage. A Farm Bureau insurance agent can work with you to determine which home insurance coverage is the best fit for your needs and budget. Did you know, Farm Bureau also offers Appliance Insurance? This covers just about anything plugged into your wall (air conditioner, furnace, water heater, appliances, TV, computer and other electrical home systems).