Are you currently struggling in the housing market? Unsure if that cute little brick number you have your eye on is the right fit for you? Do you know what questions you’re going to ask during the home buying process – let alone when interviewing a realtor?
Without a doubt, buying real estate always seems like a daunting task, regardless if you’re a first-time buyer or a seasoned property master. The economy is always shifting, and like any large investment, much thought and research have to be put into making a financially responsible decision. After all, there’s a lot to consider!
For instance, according to the United States Census Bureau, the median sales price for houses bought in September 2019 was $299,400. During the same time, the average down payment was $59,880 – that’s quite a bit of money!
The business of day-to-day life makes it hard to invest enough time and effort into the home search. But you are not alone. And we at Financial Professional promise it’s more than feasible.
So what’s the easiest way to achieve your dream home?
Start by asking the right questions before you buy a house. We’ve got some GREAT questions to help you get started on the right path – questions to ask yourself, your realtor, and the seller when buying a home. This way, you won’t only be able to enjoy the physical comforts of your new home, but also the comfort of knowing you made the right decision for your finances and lifestyle.
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Before you start the house hunting process, it’s important you identify what you want and need in a home. If budget is a big factor in your house-buying decisions, create a table comparing your house wants to your needs. For example, picking a house with a smaller yard may not make you the talk of the block, but it will save you money on lawn maintenance services. Noise and location may also be important to you for purposes of work or school. This separation of wants from needs is incredibly critical to making the right financial decision. After all, the listed price on a house is often not the actual price you will be paying. There are always other known and unknown costs to consider in the home buying process.
With that being said, some of these costs are flexible. It all depends on the particular house and situation. However, knowing that there are all of these costs associated, you will need to make decisions (and probably some sacrifices!) in order to pick the best home for you before purchasing. Furthermore, knowing your home requirements will help prepare for later when you have to interview a realtor about buying homes.
That leads us to our first question to ask yourself.
AKA: number-crunching time! (But we promise it won’t be super complicated).
The first thing to do is to calculate your total monthly income and then multiply it by 25% (in a calculator, income x 0.25) to get your maximum mortgage payment. Once you also account for the additional costs like utilities, repairs, and appliances, you’ll have a good ballpark estimate for how much you can afford on a house.
Check out our resource on types of mortgage loans for a more in-depth look at the financial side of house hunting.
It’s highly suggested to save at least 10%, if not 20%, of the house price for your down payment. Do not take on a mortgage with payments that are more than 25% of your monthly income though, or you run the risk of being bogged down financially.
There is generally a “five-year rule” for buying a house. You will want to pick a location that you plan on living in for at least five years to make sure you don’t take a financial hit. One of the reasons for this is because of your closing costs associated with the home purchase on both the buyer’s and seller’s sides. Since this fee often runs about 2-5% of the home purchase price, it usually comes out to thousands of dollars depending on the location, type of property, and type of loan.
Furthermore, the interest on mortgage payments is usually much higher in the first few years of home ownership. It usually isn’t until the fifth year of mortgage payments and progress on the principal payment that it becomes a financially better deal than paying rent each month.
Of course, it is still possible to buy a house even if your plan is to live there for less than five years. The biggest factor in this decision is mortgage payments, but it can work if you buy a cheaper home and make extra payments. Another option would be to purchase a house, do some renovations, and then rent it out.
Well, there is no set answer! It really depends on what you (and potentially your partner) are looking for. As a general way to start brainstorming your home requirements, here’s a list of things to consider:
Once you feel comfortable with what your personal home requirements are, it’s time to start the search. A good way to start is by finding a good realtor or buyer’s agent. Ideally, they should be able to answer all of your house questions and help make the home buying process easier – especially before making an offer. Depending on your budget and target market, however, you may have to interview several realtors first to make sure they are best suited for your needs in buying a home. This is especially important since you’ll more than likely be communicating with them for several months during the house search.
Some general tips for finding the best realtor for your needs:
It’s also often useful to prepare a list of questions to ask the realtor regarding the community and neighborhood, followed by narrower questions about specific homes. A good agent should be able to answer most of the following questions easily.
Again, depending on what your personal preferences are, you may be more focused on how friendly (or nosy!) the neighbors are or perhaps general community safety. A realtor familiar with the area should be able to tell you his/her general feelings about the neighborhood’s energy, demographics and feel – especially if they sold other houses in the area. Your realtor may also be able to tell you of any local nuisances like construction, traffic, or other neighborhood concerns.
If you are a person who enjoys the variety of activities a city can offer, this is definitely a question to ask your realtor. A good house location should be able to offer you the opportunities that you are looking for with room to explore other locations with ease. Likewise, you might also be concerned about city noise and would want to live as far away as possible. Either way, it’s a good topic to bring up with your realtor in the home buying process!
Some neighborhoods (especially condominiums) have their own HOAs with a board of council members comprised of the community’s residents. If a neighborhood has an HOA, membership is usually a requirement as the HOA’s purpose is to make and enforce rules on the properties. Each HOA often lists its own set of regulations in the community’s constitution which may include conditions on owners and their properties such as type of fences, the color of paint on the house, and landscape restrictions. It often also details penalties for violations of these regulations, as well as legal ramifications if conditions are not met.
In exchange for the monthly/annual membership fees, the HOA works to protect property values and community rules, and provide services, amenities, and facilities to its residents. When it comes to your home buying decision, however, it may help to check your local HOA health.
This is probably one of the questions you want to ask your realtor right away when looking at a home. If it’s been on the market for a long time, there may be some property issues. A general rule for prospective house buyers is that you should not give a low offer if the house has been on the market for 21 days or less. On the other hand, if it’s been on the market for longer than 90 days, it’s safer to low-ball it – perhaps at 90% of the asking price. Anything in between, ask your realtor how to handle the negotiations!
No one wants to be the “crummiest house on the block”! It’s important to ask your realtor for insider knowledge on the house value in comparison to other houses in the neighborhood. This will help you know if you are buying at a fair price. If something is off, it’s probably worth digging into.
So now that you’ve exhausted questions to ask yourself and learned how to interview your realtor about buying a home, now it’s time to ask the most important person of all – the seller! They are, after all, probably one of the leading experts on what living in the house will actually be like. Furthermore, the more you understand about the seller, the more you may be able to negotiate house prices.
It may be a bit straightforward, but don’t be afraid to ask this question! There are many reasons why people move. It could be because of job relocation, marriage, retirement, or other personal reasons. However it could also be something to do with the neighborhood, like if there are too many floods in the region. As you can imagine, it could be particularly useful to know things like this before buying a home. Even if the seller may not be the most truthful with his/her answer, it is still worth a shot! The seller may even be willing to accept a lower home offer if they are in a rush to sell, or are aware of the property issues impeding prospective buyers.
Disclosure rules vary depending on the state, but sellers often have to disclose any CURRENT ****problems with the property. They are not, however, required to reveal any past problems. While it may not necessarily indicate any serious home issues, knowing the history helps you understand potential problem areas. It’s crucial before buying, to ask the seller questions about any home problems, how well the solution works, and who they contracted to do the work should there be a similar problem in the future. Hiring the same maintenance team could prove more effective if they are already familiar with your home systems.
It may also be a good idea to ask for a C.L.U.E (Comprehensive Loss Underwriting Exchange) report that outlines any homeowner insurance claims from the past seven years. Be sure to keep an eye out for water damage too – one of the homeowner’s biggest threats!
Unfortunately, not everything you see is necessarily what you get. It’s important to ask questions about what is included with the home before you move in and find the open space where the refrigerator used to be. Ask what appliances, lighting fixtures, or furniture may be left for you. This will give you an understanding of what other costs you may incur.
Living at home costs money too! First-time homeowners may not be prepared to account for utility costs depending on the house’s size, layout, and/or energy efficiency. By asking the current homeowner for a copy of the past year’s utility bills, you should be able to have a better understanding of how much monthly expenses will be. Budgeting accordingly will be crucial.
This question can be a good way to gauge how enjoyable the home living experience is. If their duration was a few months, they may not be the best at painting how life can be in the home. But if they made this house a home, they may be able to describe the house’s charm, benefits, and hidden details that a realtor can not. After all, they also probably had to ask a lot of questions when they were buying the home. Just pay attention to the details and potential red flags.
Although updates can add value to a house, you should question the details of any renovation. Some renovations may not follow local building codes and if you become the owner, you are held accountable for any violations. Before buying a home, ask if they have the original house plans and the contact information of whoever was contracted to do work. This will again help you understand and possibly negotiate the home's asking price.
It may seem hard to ask this question when buying a home, but you can work it into your conversation. If there is a chance to save money, take it! During your conversation with the seller, ask if they are willing to pay for any home repairs to help “sweeten the pot.” It could be painting, flooring, closing costs, or even home warranties. After all, a couple of thousand dollars in repairs probably isn’t as important to the seller compared to the hundreds of thousands of dollars they would get from selling the house to you.
We are not going to sugar coat it – the home buying process is certainly difficult. But asking these top questions should help make your purchase decision easier. We also have a guide to what to know when buying a house that goes more in-depth about what to look for yourself. Since buying a house is likely one of the bigger financial commitments you will make, you can never be too careful. Your best bet is to use as many resources as possible and interview your realtor about when and how to buy a home. And never be afraid to ask questions!