How to buy a home and save money
Before you even think about buying, plan for four to six months ahead of time. See how much you can save each month, how much you can devote to a house payment and still maintain your savings, and look around at neighborhoods you want to live in.
Next, get with a good lender. They will run your credit reports and tell you how much home you “qualify” for.. This number will most likely be much higher than you thought.
Why do you think there are so many foreclosures today? What you qualify for is not necessarily what you can pay back. I have used a rule of thumb for many years that is still the best I have ever seen. One weeks salary should pay for your house payment, including taxes and insurance payment. So, if you make $4000 a month, budget no more than $1000 for your house. That may seem conservative, but no one I know that has used this system has lost their house yet either.
Next, find a good Realtor. Ask friends, family, etc. In most cases, the seller pays for all Realtor fees, so as a buyer, why not take advantage of a professional that will work for you at no cost. Just be aware who the Realtor is representing. Try to get one that will be your buyer’s agent, representing you.
Try to find a house in an established neighborhood with good schools. Even if you don’t have children, it will be good for resale. School ratings are available online for most every city. Don’t buy in an unfinished development unless you are happy the way it is, because it may never get finished. Talk to other people in the neighborhood and see what they think of their houses.
Look over the neighborhood at different times of the day, and especially at night. There is a reason they say “The freaks come out at night.” Ask if you can spend a night or two in the house before you buy it. You might be surprised what you hear, see, or smell when you live in a place, as oposed to visiting it. If the seller is really motivated, you might be surprised what they will let you do..
Also, consider how far your work is, church, and schools, and drive to those during rush hour to see if it is a trip worth taking. Try to view the house when it is raining as well. Again you might be surprised at the lake in the back yard. Have a termite inspection also, even if one is not required by law. Usually a home inspector can do this for an extra fee.
Get an inspection. Most buyer’s agents will insist on this, but make sure there is a contingency in the contract if the house doesn’t pass inspection, you don’t have to buy. Also, make sure the contract is contingent on you getting a mortgage below a specified rate. If the loan falls through, and they do often, you could owe thousands of dollars without this protection.
Hire a lawyer to look over any contracts before signing. Here, most Realtors will balk because it may kill the deal, but be firm, a lawyer’s review is great insurance. This will most likely be the biggest purchase in your life, why not spend a little to make sure it goes right? Why jump out of an airplane without a parachute? Finally, get a title insurance policy in your name, not that of the bank. Again, you want to protect yourself in case anyone challenges the title.