12 Wise Steps for Buying a Home
When you decide it’s time to buy a home, especially for the first time, there are a lot of very important details you need to know that can save you a
massive amount of time, money, and problems if you just make an effort to pay attention to what you’re doing and use a little common sense.
I’m convinced that the reason so many people have been foreclosed on and are struggling is because they failed to use some of these common sense rules when
they bought a house and they ended up getting burned because of it.
The upside is that now there are some awesome bargains out there right now due to the huge numbers of foreclosures and short sales that have happened over
the last year or so.
It’s definitely a buyer’s market.
“By wisdom a house is built, and through understanding it is established.”-
So what are some of the things you absolutely must do when you’re buying a house to make it a wise financial decision? Let’s take a look:
1. Figure Out How Much You Can Afford
Many experts recommend having a mortgage payment of no more than 30-33% of your gross monthly income (I’ve even seen higher recommendations), but I believe
that 25% is a much more reasonable amount and will end up serving you better in the long run to help keep you out of financial trouble.
Never, ever let the bank or mortgage company tell you how much you can afford. Their job is to tell you how much they will approve for you to borrow, which
is usually much more than you should actually spend.
So be careful, just because they approve you for a certain amount doesn’t mean you should spend that much.
2. Get Prequalified
Once you’ve decided how much you can comfortably afford to spend on a house, go ahead and get prequalified for a mortgage. That way, the seller knows
When you already have financing in place you’ll be much more likely to close in a timely manner without any delays because of the sometimes tedious process
of getting financing for your purchase.
3. Choose the Right Mortgage
The shorter the term the better. Why? Because you save money on interest. Buying the same house with a 15 year mortgage versus a 30 year mortgage will save
you tens of thousands of dollars. Plus you’ll only have 15 years of mortgage pain as opposed to 30.
Yes I know the payment is higher on a 15 year, but it's worth it to keep from spending all that extra money in interest. It's your money and it
will stay in your pocket if you act wisely.
Also, choosing a fixed rate mortgage is wise. If you choose an adjustable rate you are basically gambling. You cannot predict the future,
and when you try to, you will get burned. Besides, we’re seeing historic low rates right now, so where do you think the rate is more likely to be
in a few years when it comes time for your variable rate mortgage to adjust? Yep, probably higher.
Don’t gamble when buying a home!
4. Have a Down Payment
The higher the down payment you have, the better position you’ll be in.
Having a sizeable down payment helps to keep you from becoming upside down (your house is worth less than you owe on it) if housing prices fall. Also, if
you put down 20% or more you can avoid having to take out private mortgage insurance (PMI) that will make your payment even higher.
Plus, having a larger down payment helps to prove to yourself and your lender that you are financially responsible enough to take on a house payment. I
always recommend at least a 20% down payment.
Of course, the best way to buy a home is to pay cash, but I know that’s just not feasible for most people.
5. Get a Realtor
A realtor is a real estate professional. A good realtor will always take the time to educate you about the process, about the market where you want to buy,
and about how to buy wisely.
A really good realtor can sometimes be hard to find, so make sure to find a professional that comes highly recommended by friends, family, coworkers, etc.
If you choose just anybody, thinking they are all the same, you may get a realtor that cuts corners ethically, doesn’t keep you updated on the market,
doesn’t answer phone calls in a timely manner, or otherwise take good care of you.
Remember, these are service professionals and you should expect them to provide excellent service. If not, find someone who will.
6. Compare Prices
Comparing home prices is as much art as it is science.
A good realtor should be able to help you with this. You want to compare the price of houses in the area where you’re looking to make sure you don’t end up
overpaying. Houses in the same general area can vary widely according to size, condition, amount of land, and other factors.
Your real estate agent should be able to assist you in navigating through these waters to make sure you spend the right amount of money on the right
property and negotiate the right price.
Is That All?
These first six things you should do before buying a house are going to help ensure that you buy wisely and keep yourself protected as much as possible
from anything that can damage you financially for years to come.
But wait! This is only the first part. I have six more tips coming up in my next post that are just as important and will round out all that you need to
know when it comes to buying a house using sound financial principles.
So stay tuned for more… I’ll post the rest in a couple of days.
"Dr. Jason Cabler is a Christian personal finance blogger, author, and speaker. He teaches how to get out of debt and live a debt free lifestyle
through his Celebrating Financial Freedom
self study course
. His new book "How to Budget- The Quick and Easy Guide to Making a Budget That Works" is now available (
more info here
). He can be reached for interviews or speaking engagements by
, and can be found on