Apr 14, 2020

When to purchase a home – Things I wish I knew before I bought a house

purchase-a-home

Buying a house is often one of the most significant decisions you’ll have to make in your life, and whether you’re buying alone or with someone else, it’s a huge step. As with all things with life-changing significance, it’s best to take a little time to consider your options and make sure you know what you’re getting into. So with that in mind, we’ve compiled a helpful guide of things that you should know before you take the plunge.

When is the best time to purchase a home?

Timing, as they say, is everything. This comes down to two things – the current situation of the housing market, and your present life situation. Let’s start with the first one.

While it might be tempting to start house hunting at the start of the year, patience is often rewarded. According to a report by Realtor.com, the best time to buy a home is during the last week of September. After analyzing more than 50 markets across the nation, the authors concluded that the beginning of fall is the optimum time, due to:

  • Less competition – As the season’s change and children head back to school, many families take a break from their search. The study found that there is 26% less competition at this time of year.
  • Lower prices – Fewer people looking for houses means that many sellers looking for a quick sale may drop their asking price significantly.
  • More homes available – The data analyzed suggests that the week of 22nd September has 76% more houses on offer than at the start of the year, and 6.1% more than the average week.

Interest rates are also an important consideration. Buying when interest rates are low means that you can get a better deal on your fixed-rate mortgage. This leads to substantial savings throughout your repayments.

Buy when the time is right for you

Buying when it’s the ideal time in your own life can be even more important than what’s going on in the outside world. As buying a house is a significant investment, it makes sense to do it when your finances are on the up, and you’re not already dealing with debts from other sources. Is it, for example, worth waiting an extra year or two till you’ve paid off your student loans, or you’ve finished paying for your car?

Although it can be hard to say for sure when the right time to buy a house is, this will generally be when you’ve reached a period of relative stability in your life.

Work out a comprehensive budget

Buying a home is probably going to be the most expensive thing you’ll ever purchase, and the costs don’t stop at the down payment and monthly mortgage payments. In addition to making sure that you can afford these without struggling, you also need to add the following costs into your budget:

  • Closing costs – When you finally complete the purchase of your new home, you will need to pay a number of different fees, and these may vary by state. There are too many different types to list here. Still, costs may include application processing fees, attorney review fees, closing fees to the agent closing the sale on your behalf, credit reports, home inspection costs, and transfer taxes. These costs generally amount to 2-5% of the purchase price. Speak to your Realtor for details and an estimate of your closing costs.
  • Mortgage insurance – If you make less than a 20% down payment on your home, you may have to take out mortgage insurance to cover yourself in the event that you’re unable to pay. This can vary from 0.5-5% of your mortgage costs per year.
  • Homeowners insurance – To protect your home and your investment in it, you’ll need homeowner’s insurance, and this is a regular cost that you should budget for. As the first payment will likely be due as you buy the house, this should be factored into your initial costs.
  • Appliances – The cost of buying appliances like washing machines, fridges, and other home essentials can really add up, so make sure you budget for this.
  • Utility bills and additional costs – Electricity, gas, and other utilities can all take a substantial chunk of your monthly budget. Use comparison websites to find the best deal. It can also be wise to keep a little money back for any repairs or maintenance that might need to be carried out around the house. 
  • Home repairs and breakdowns – The typical rule of thumb is to expect to spend an average of 1-3% of the value of your home on repairs every year. While every situation is different and you may not spend that every year, you’re likely to run into a huge repair expense every few years. 
  • Home warranty – A home warranty is a contract between you and the home warranty company, like Fixd, that helps you be prepared to cover the costs of those unexpected breakdowns. Home warranty plans include the essential components of your home, ranging from plumbing, electrical systems, and major appliances such as refrigerators. 

Check your credit score before beginning the process

Few things are as disappointing as finding the ideal home and then being denied a mortgage due to issues with your credit rating. Obtain a credit report well before you purchase a home so that you can resolve any problems in advance. You should also do everything you can to enhance your credit. You can do this by paying off outstanding debts and not taking out any additional loans before you apply for a mortgage.

Get pre-approved

One of the best things you can do to improve your chances of getting the home you want is to get pre-approved for a mortgage. This means that the lender will carry out a thorough review of your credit, finance, and assets to determine your creditworthiness.

As well as being a good way of avoiding issues when the time comes to actually take out a mortgage, being pre-approved shows sellers that you’re serious. This can give you a competitive advantage over other buyers. It will also allow you to know in advance exactly how big of a home loan you can take out and how much your monthly payments will be.

Take your time

Again, while buying your first home can be exciting, it’s essential to take your time. Doing so will give you the space to find the best deals when it comes to choosing lenders and realtors. Most importantly, it will help you in selecting a house and neighborhood that will hopefully be a happy home for many years to come.