Happy New Year!  I have begun to hear more from friends and clients about possibly buying or selling a home in 2012.  The market is improving and that can pose both opportunities and threats.   It has been a few years since we reviewed some important tips to home buying, so I thought since Spring (when many people begin their search) is just around the corner it would be a good time to recap.

There’s no doubt about it – owning a home is an exciting prospect.   Currently, thanks to low prices, some easing in financing, and a better job market, homes are selling better than they have in a number of years.  This is some of the best economic news that evolved during 2011.  We had become an immobile country.  Many people could not move to where they might find a job because they had a home they could not sell.  Now that the market has picked up, people are more mobile to go to where the jobs are.  This is good for housing and for unemployment.  Regardless of the motivation, buying a home can be stressful, especially when you’re buying one for the first time.  Fortunately, knowing what to expect can make it a lot easier.  Let’s explore some of the important questions you should ask yourself before setting foot in the first property in your search.

How much can you afford?
According to a general rule of thumb, you can afford a house that costs two and a half to three times your annual salary.  Unfortunately, determining how much you can afford to spend on a house is not quite so simple.  Since most people finance their home purchases, buying a house usually means getting a mortgage.  So, the amount you can afford to spend on a house is often tied to figuring out how large a mortgage you can afford.  To figure this out, you’ll need to take into account your gross monthly income, housing expenses, and any long-term debt.  Try using one of the many real estate and personal finance websites to help you with the calculations or call you financial advisor.

Should you use a real estate agent or a broker?
A knowledgeable real estate agent or buyer’s broker can guide you through the process of buying a home and make the process much easier.  This assistance can be especially helpful to a first-time home buyer.  In particular, an agent or broker can:

  • Help you determine your housing needs
  • Show you properties and neighborhoods in your price range
  • Suggest sources and techniques for financing
  • Prepare and present an offer to purchase
  • Act as an intermediary in negotiations
  • Recommend professionals whose services you may need (e.g., lawyers, mortgage brokers, title professionals, inspectors)
  • Provide insight into neighborhoods and market activity
  • Disclose positive and negative aspects of properties you’re considering

Keep in mind that if you enlist the services of an agent or broker, you’ll want to find out how he or she is being compensated (i.e., flat fee or commission based on a percentage of the sale price).  Many states require the agent or broker to disclose this information to you up front and in writing.

Choosing the right home
Before you begin looking at houses, decide in advance the features that you want your home to have.  Knowing what you want ahead of time will make the search for your dream home much easier.  Here are some things to consider:

  • Price of home and potential for appreciation
  • Location or neighborhood
  • Quality of construction, age, and condition of the property
  • Style of home and lot size
  • Number of bedrooms and bathrooms
  • Quality of local schools
  • Crime level of the area
  • Property Taxes
  • Proximity to shopping, schools, and work

Once you have answered the affordability question, chosen to use an agent or not, and identified features of the right home for you, you can begin looking.  Getting these steps out of the way first will make the process much more enjoyable and help minimize the number of bumps that you will come to in the road.  When you find the right place, be ready to make swift, well thought out moves rather quickly.  Chances are if you have found something you like, someone is waiting just around the corner should your deal fall through.  Most of us have heard the Boy Scout motto,“ Be Prepared”.  Purchasing a home is no exception.