by Chris Penny
on Monday, July 20th, 2015 at 7:30am.
So you have decided to buy a home, and you have identified one that you love and you want to make an offer. You need to prepare yourself for the task ahead. The way you prepare yourself will make the process either a success or a failure. Here are three things to know before you buy a home and jump into the fray.
Determine What You Can Afford
You need to understand the home you can afford. The first thing to do is to determine your debt-to-income (DTI) ratio, which is the ratio of your expenses to what you earn at the end of every month. The aim is to help you understand how much you can pay in terms of monthly mortgage payments and remain with enough cash to survive on. Most lenders require you to have a DTI of less than 50%. Lenders understand how hard it is for you to determine an ideal home for your income, which is why they have come up with websites and tools to help you make a decision.
The next stop in finding out what you can afford should be your real estate broker. The broker will assess your income and help you determine your DTI if you haven’t already done so. The broker will then advise you on the various options that you have and help you make a decision.
After you have done all this, it all depends on your comfort zone. You know how much you can comfortably spend, and this should influence your final decision.
Location, Location, Location
Whether you plan to buy the home for investment purposes, as a first home, or as an upgrade to your current one, you need to find the ideal place to live. Location determines the future value of your home and your everyday life. It also determines the types of job opportunities that you will access, the climate of the area, and the average home prices.
One of the issues that come up when looking for a location is the setting of the area. There are different settings that include city, suburb or rural. This setting will determine the level of peace you have, the space available for you and the public services you can access.
The type of neighbourhood you choose comes into focus when picking the right location for your home. This is because different neighbourhoods have different characteristics. You need to choose an area that fits closely with your personality and your lifestyle. Look at schooling option, churches, community leagues, daycare, crime rates, shopping, rec centres - some or all of these can make a neighbourhood be more or less desirable.
Your work is vital to you, and your location should make it easier for you to work. The time you take to travel from your home to your workplace can have a significant impact on your income. If you live far from work, you might end up spending more than half your income on traveling alone, which doesn't make sense. The distance will also affect your quality of life as well as the time you have to spend with your family. If you plan to stay at your current job for the foreseeable future, you need to be close to it. However, if you are planning to switch jobs soon, it's a good idea to buy a home near your new job. On the other hand, if you decide to change jobs, understand what prospects you have regarding the kind of job you are looking for.
Negotiating for a Home
Most sellers expect you to negotiate on the price quoted, but also they also expect you to provide a reasonable deal. Making an unrealistic offer can result in a seller rejection. Understand the going price for similar properties in the area and make an offer that you can work on with the seller to reach an agreement.
To make the negotiation faster, try to understand the market. For instance, find out how long the house has been on the market, how much has been offered on the house before, and different price fluctuations the house has experienced. Don’t stop there, go ahead and find out similar homes that are up for sale. A good real estate agent will have this info for you.
To negotiate better, offer the seller non-price perks. One of the benefits sellers like include paying in cash. This is because the seller won’t have to wait for you to apply for a mortgage before selling the house. Sellers are always looking for a way to close the deal faster.
While these three items aren't the only things you should know before you buy a home, they are pretty important. Having a good grasp on these concepts will help you in the long run.