We quickly discovered that while
searching and buying your next home may prove to be both
exhausting and enjoyable experiences, there were many things
that we still needed to research.
1. What Type of Home is right
Depending on where you live,
there is most likely a wide variety of home styles to select
from when choosing your new home. town homes, condos,
single-family homes, etc... While everyone's personal finances
and scenarios are different, there are a few universal factors
to consider. For instance, most town homes are statistically
harder to resell, they usually come with higher HOA fees, and
of course you get to know your neighbors very well whether you
like it or not. When my wife and I were looking for our home,
we automatically resorted to touring several town homes simply
because of the fact they were cheaper. This is not always the
case! Let's say you buy a town home and finance 130k over 30
years at an interest rate of about 3.75%, you might end up
with a payment around $750. Tack on an additional $100-$200 in
HOA fees and you should be paying roughly $850-$950 without
insurance. Now in a different scenario, let's say you buy a
single family home and finance $150 at the same rate. If you
live either in a neighborhood with low, or better yet, NO HOA
fees, you should be paying around $850-$950 without insurance.
The same price! Granted this won't apply if you decide to live
in a glamorous neighborhood with fancy amenities and high HOA
fees. If that were the case, you can probably choose to afford
whichever type of home you want. Overall, what's important is
that you consider all possibilities before you rule any
2. How do I know the Quality
of a Home?
You wouldn't buy a car
without popping the hood would you? The same should apply to a
house...well sort of. Fortunately, my wife and I were
accompanied by a family friend that was experienced in
building homes and real estate, so our initial inspections
were more thorough than they would have been on our own. If
you can't have someone knowledgeable in this area with you,
then it is probably best to try to research the company that
built the home. You can discover what others are saying about
that company, if they have a solid reputation, how long have
the been in business and what their strengths and shortcomings
are. The company that I worked with was Celebration Homes of
Nashville, TN. If you live in the Nashville, TN area, I highly
encourage you to check out some of their work at http://www.morespacemorestyle.com.
Make sure that if you decide to make an offer on a home, you
make it contingent upon passing a certified home inspection.
That way, if the inspector finds something wrong with the
home, like bad plumbing, electrical and HVAC, you'll have an
exit and won't be contractually obligated to follow through
with your offer.
3. How much Should I Spend?
This is probably the most
important question you will ask yourself. There are many
different perspectives on this, but my personal opinion would
have to agree with Mr. Dave Ramsey's view. Make sure you are
spending no more that 25% of your take home pay on your
mortgage. Granted, some of us are better at managing money
than others, but a safe rule of thumb should be no more than
25%. If that puts your house budget in the $150k range, that
does not mean to necessarily rule out houses in the $160k or
even $170k range. It is a buyers market right now, so sellers
may be a lot more willing to let their homes go for a lot
less. Also, be careful of making too much of a "lowball"
offer. You might offend the seller and he or she will choose
to not do business with you. And lastly, don't forget to
factor in closing costs, and try to safely put as much cash
down up front as you possibly can. The more you have in a down
payment, the lower the interest rate you will most likely
The housing market is on the
mend, so if you're thinking about becoming a homeowner, be
sure to not miss out on these historically low interest rates.
This is probably the lowest it will be in our lifetime, but
first just make sure you and your family are ready for the
responsibility and commitment buying a home requires.