Becoming a homeowner can be a daunting task, especially for first-time buyers entering the market. Not only is your home likely the largest purchase you will make in your life, but you will want to make sure the home you buy fits all your needs as well. With so many factors to consider when starting your home buying process, you will want to ask several questions. The answers you receive will help you determine if the house you are buying is the right one for you!
1. What is My Total Budget?
Before you start viewing listings, it's essential to review your finances and assets to have a clear understanding of your budget. You can also narrow down your search, saving you time by only looking at homes that you can afford and fit into your budget. According to Investopedia, many prospective homeowners can afford to mortgage a property that costs between 2 and 2.5 times their gross income. For example, if you earn $100,000 per year, you can afford a house between $200,000 and $250,000.
To get the best understanding of how much you can afford, you may want to get preapproved for a mortgage. The lender will review your assets and indicate how much money they can lend you for the home purchase. This step takes out a lot of the guesswork for you to determine your budget and shows sellers serious about making an offer when you find the right house.
2. What are My Total Costs?
For practically every homebuyer, there are more costs that you will need to cover beyond your mortgage payments. It's essential to consider these expenses when beginning your search and be careful about maxing out your entire budget on the mortgage payments alone. Some of these costs are one-time, such as closing costs and moving fees. However, many monthly expenses are tied to your home, such as utilities, property taxes, and insurance. You can ask the seller what they pay for these expenses to get an idea of what you will be paying when you buy the home.
The home maintenance budget is the most common cost to overlook during the homebuying process. As a homeowner, it's essential to stay on top of proper maintenance for the various systems and appliances in your home to ensure they remain in working order for their whole lifespan and avoid more significant issues from developing. It is also recommended to keep an emergency fund for any unforeseen incidents that may result in costly repairs.
3. What is Included in the Sale?
When viewing a fully furnished home by the current owners, be sure to clarify what is and is not included if you were to purchase the home. Often, anything that is a "fixture," such as the cabinets, ceiling fans, and landscaping, is left behind when the seller moves out. On the other hand, items such as large appliances (refrigerators, washers, dryers, most furniture, etc.) and décor are usually taken with the seller when they move out.
The listing may contain an outline of everything included with the sale of the home, but you can also rely on your real estate agent to find out that information on your behalf. If you want something to be included in the sale of the home that is not in the listing, you can always make an offer on the item and negotiate with the seller.
4. Why is the Seller Leaving?
Asking this question can provide some insights into a few different areas. Understanding the position that the seller is operating from can assist with your negotiations. For example, the family may be upgrading to a larger house to allow their family to grow or relocating into a new area for a job opportunity. Reasons like these suggest the seller is motivated to close the deal, though not every situation may be as clear-cut as these.
5. How Long has the Home Been on the Market?
Your real estate agent can tell you how long a property has been on the market, which again gives you more information as you approach your offer and negotiations. Sometimes, a longer market time may give you an opportunity to negotiate a better price on the property.
6. What Have Similar Homes Been Sold for in the Area?
Researching what similar homes have sold for in the area is an excellent way to get a sense of what you can expect to pay once it's all said and done. Resources like Zillow or Redfin can help you find this information, or you can always ask your real estate agent. Comparing the recent sales in the area combined with price of the home you are pursuing can help determine if it's a reasonable price.
7. How Old is the Roof?
Like most systems and components found in the home, there is a life expectancy of the home's roof. Even with proper maintenance, sooner or later, the roof will need to be repaired or replaced, which could be an expense costing thousands of dollars. Be sure to get the roof's age and any documentation of repairs from the seller, given that the repairs or replacements are expensive.
8. What Conditions are the Home's Major Systems in?
Just like the home's roof, you will want to get an understanding of the home's overall condition to make sure you are making a sound purchase or addressing any issues that come up. Getting the home inspected by a professional is the best way to learn about the state of the house and its systems. The inspector will offer their expertise and take advantage of specific tools to assess the home, ultimately providing a complete home inspection report with all their findings. In many states, the seller is legally required to disclose any known issues to potential buyers.
9. What is the Insurance Claim History?
Asking the seller to provide a CLUE report (Comprehensive Loss Underwriting Exchange) for the property is excellent to predict the insurance rates and coverage available to you once you become the owner. The CLUE report is similar to a credit report, a comprehensive list of the past 5-7 years of insurance claims made for the property. Unfortunately, as the new homeowner, any previous claims on the property may impact your rates due to its track record and potential for more issues to arise, such as mold forming due to previous water damage.
10. Is There Concern for Flooding or Other Natural Disaster?
Depending on the area you are looking to buy a house in, you may be susceptible to flooding or other natural disasters. If the home is located in a flood plain, you may be required to get additional insurance coverage known as flood insurance. FEMA offers a Flood Map Service to determine if your home is in these at-risk areas. Extreme weather concerns and natural disasters vary widely by region and state. Being aware of the risks you may be exposed to and taking the proper measures to protect your home further can make a big difference.
The home buying process has a lot of moving pieces to consider. The more you can do to be prepared and enter the market with a clear goal, the fewer hiccups you are likely to come across and be ready to handle with the guidance of your real estate agent.