Whether you are considering purchasing a home as your first investment property, or are sick of renting and looking to take the next step in your life, we have collected little bits of advice to help you navigate these waters!
The home buying process, while extremely rewarding, can be highly stressful. Going in with the right knowledge (and a support crew) can make a big difference in your success and over all stress levels during this process.
The first thing to know when you are considering buying a home is on the potential investment. Buying a home is a big commitment! Can you afford it? What if you were to lose your job – would you still be able to pay for the mortgage? This all goes into determining the best timing to buy a home:
Are you planning to stay put for a few years? If no, then potentially buying a home is not the most financially-sound decision. In addition to the cost of the home, there are other transaction costs that would add to your total amount lost if you had to move.
Know from the start what you can afford by talking to your bank. This way, you can avoid wasting time looking at houses you can’t afford. There is also a pre-qualification process, which includes a cursory review of your finances. The pre-approval process is based on your actual income, debt, and credit history.
Find a Realtor.
There is no reason to navigate this search alone. Finding a realtor can help you go through the home buying process as efficiently as possible, especially when it comes time to start bidding. Make sure you are pulling advice from other sources as well though!
Know what you can Afford.
Based on your salary, the cost of the home should be 2 and a half times your annual income. (For example, if your household income were $80,000, you could afford a 200k home.) It’s wise to not max out what you are capable of purchasing. Ideally, if the cost is closer to 2x your household income, then you will be able to set more money aside and the house will obviously pay itself off much quicker. If you are considering this home as a rental investment, consider what the local average rate is for rent in similar homes and factor that in. (Know too that mortgages on investment properties tend to carry slightly higher interest rates.)
Consider that 20% of the total cost of the home is usually required as a down payment. If you can’t afford the 20%, it is possible to find a low-interest mortgage that requires a small down payment if you qualify. This is why it’s helpful to know your credit score, and try to improve it many months in advance of buying a home.
Get a Home Inspector you can Trust.
Finding a trust worthy and affordable home inspector isn’t easy. The best advice is to get one recommended by friends who have had a positive experience.
Do the Math:
Should you buy? Calculate the average cost of rent in the area, and compare to a potential monthly mortgage.
If you are looking to invest in a new home for investment purposes, consider hiring a property manager to manage that process for you! Finding qualified tenants that can pay rent on time, and having some one to manage their maintenance issues in a timely manner is crucial.
Property Management Pros is your #1 source in property management! Find a location near you.