I wanted to write this post as a simple how-to. But in reality, buying a home involves a lot of “It should be only 1, 2, 3. But now because of fill-in-the-blank, we have to do 1A, 2A, 2B and then C3. Maybe that’s why this post is 3 months late! Ce la vie.
With that said, I’m going to outline the Must-Do’s (stuff I think you’d be crazy to neglect) and add in on occasion the Could-Dos (things you might not need to but, if indicated, could save your buns in the long run.)
Must Do
- List
- Get Pre-Approved
- Get a good realtor.
- Get Inspections
- Re-evaluate
1. The List.
Write down needs, wants, dreams and price limit. Do this early. Again: You need to do this. You wouldn’t be planning a huge dinner party and then go to the grocery store without a list. Or you wouldn’t go to the car dealership and buy without knowing what you want- so why would you make possibly the biggest purchase of you life without pinning down your needs, wants and price? Be realistic with the needs and feel free to dream with the wants. Having the price will help keep this in the realm of reality. You’ll probably do revisions which is ok, but this helps you have a place to start. Here’s an example of my list:
Needs
-
- Safe Neighborhood
- 2/2
- 180k or less. Make sure to factor in expenses like homeowners insurance, property taxes and specialty insurance- like flood insurance.
- Assessments paid (this is a non-optional 20k expense added on to mortgages in my city for connecting to city water and sewage)
- Open Kitchen
- Yard
- Lanai
Wants
-
- 3/2
- White kitchen
- Tile
- Outside flood zone
- NO POOL
2. Pre-Approval
Basically you take a bunch of paperwork to 2-3 banks and get quotes on how much home they think you can afford. Whatever they say, you should take it down by at least a 1/3. By our calculations, we could afford 180k or less with the lifestyle we wanted. By the bank’s calculation we could afford 250k+. It took me a minute to figure out why these numbers were so different, then it hit me:
If they loan me 180k 4.5%, 30 years: I pay $118,666 (in interest alone)
But,
if they loan 250k 4.5%, 30 years: I pay $165,637 (in interest alone)
That’s a $47,000 difference. They could make $50k off me. No wonder they quoted me so high!
A LOT of money! They more they loan you, the more money they make! Almost an extra $50k for the bank… or for you. Your choice!
Also, I’d encourage you to consider budgeting to pay your home off in 15-20years, even if you get a 30y loan. You can often make additional payments to get it paid off early and save a boatload of money in interest (just double check because some places charge you a fee for paying off early!)
3. Get a good Realtor
All I’m gonna say is check with the people you like and respect to see who they used and try to test-run a few to make sure your personalities jive. It can be a long and stressful haul together and you want to feel comfortable.
Could Do: Price Inspectors. At this point, you can also get some ballpark figures from 2-3 inspectors. Just let them know the size range of home and year. Generally they can give you an idea of the cost and you can get a feel for how much time they’ll spend (or wont spend) with you once you’re a customer. We didn’t do this early and I regret it- we got good service, but some of the inspectors spent 30 minutes going over results and concerns with us right after while others spent only 5 minutes and said “It’ll be on the report.”
4. Get Inspections
Inspections ended up costing us about $5k BUT saved us about $15k- pretty significant. We did the 4-point and WindMit (I think those two are specific to hurricane zones), comprehensive home, sewage, asbestos and lead. Most things turned out fine. One did NOT.
Comprehensive/4-point/WindMit combo: Educational. We were able to go around the house with the TEAM of inspectors and see into crawl spaces, where the breaker and main water line is and what behind the fridge looks like. There were no chubby, slow, easy going Billy-Bob inspectors we met. They were fast, efficient and thorough.
Could Do: Lead and Asbestos These tests fall under the “Could-Do” list. They actually have to be sent out to a lab and can take up to 4 weeks to get results! We paid extra to get everything expedited and thank goodness so, because while there was no lead, they found asbestos in every ceiling (even the garage).… Removal and refinishing cost about $15,000 (that was the cheapest, safe options) but could’ve easily cost $20,000, since we repainted the ceilings ourselves instead of paying someone else to. Since we knew at purchase, we got the purchase price to be reduced significantly to cover costs. Not bad for a 1k test. If we hadn’t done the inspection… I shiver at the thought.
Could Do: Radon Another optional depending on your area. Here on this coast of Florida, theres not a lot of (read ANY) basements, which are a big risk factor for radon. However, newer construction homes can actually have higher levels of radon too! For us, our neighborhood was 1950s-1980s homes, all without basements, and by checking reported radon levels in the area, we found we were extremely low risk. Therefore we did not test for radon.
Area-Specific Concerns: For our area there were 3 things we had to consider that other places don’t:
A. Chinese drywall: During the early 2000’s building exploded nearby and cheap chinese drywall was imported to keep up with the housing boom. It is extremely toxic and has to be totally ripped out and replaced. Extremely expensive.
B. Polybutylene plumbing: This was used instead of copper or PVC and is known to burst and fray internally. Repiping can run $1,000+ per spigot. Ouch. Look under the sink: if its grey piping, its likely polybutylene. White is PVC, copper is, well, copper. Admittedly, you cant see whats in the wall, but checking under sinks is an easy, quick overview.
C. Assessments: Our city recently started requiring that homeowners move from well-water and sewage tanks to city water and sewage. The cost for this is about $20,000, which can be spread over fill-in-the-blank years. Not a dealbreaker, but certainly a major factor in purchase price. Our home was in one of the first areas they started requiring this, so all assessments were paid in full already.
5. Re-evaluate
Just take a breather. It is so easy to get caught up in just wanting it all to be over and be able to move on to the next phase of life. I remember! But try to picture the next 10 years in that home… Does it work? Are finances a too tight? Are your kids/family/spouse/friends safe there? Is there something that already annoys you about it? If so, is it something you can fix (tear down a non-loadbreaing wall or repaint) or something you can’t (driveway onto a busy street or long drive to work)? Consider your reality and your ideals. Will this home work with your reality and help you pursue your ideals?
Thanks for visiting! We can do this!