What You Need to Know About Buying a Home
Buying a home is a significant financial decision—likely one of the biggest you’ll make during your lifetime. It’s also easy to let your emotions get the best of you during the buying process, especially in a hot seller’s market. To help you out, we’ve compiled a list of some important things to know when you’re buying a home in Madison.
- Your choice of realtor is important. (Of course, we feel that way!) The first thing you need to know is that as a buyer you are not paying the realtor. That’s on the seller. It’s wise to hire a trusted real estate agent who is looking out for your best interest. The listing agent’s job is to work for the seller, so you need your own agent to represent you, especially when it comes time to negotiate. It’s not that the listing agent won’t be fair, but their allegiance lies with the seller.
- Contracts are negotiable. As with any industry, real estate has standard contracts. But it’s also true there is room for negotiation. If you’d like more time to respond to the inspection, ask for it. Don’t want a radon test? Don’t get one. Here again, a good agent will work with you to make you comfortable with every contact you sign. Your realtor will also know if altering the contract weakens your offer in a potentially competitive situation.
- Think beyond today. Long term plans need to be part of the discussion when buying a home. If you’re childless now but are considering starting a family, the schools in the neighborhood suddenly become more important. Or if you’re contemplating a career change down the road that may affect your salary, it’s wise to familiarize yourself with the terms of your mortgage to determine when you’ll actually start building equity and if selling in a few years makes sense or not.
- Your relationship status matters. If you’re married and get a divorce, the law dictates the distribution of your assets. That’s not the case if you and your significant other are not married. Having an agreement in place ( a real one crafted by a lawyer) that specifies who is responsible for what regarding the title and mortgage payment if things don’t go as planned, is smart.
- Remodeling might cost more than you think. If the home you want to purchase requires anything other than cosmetic changes, do some homework before signing the offer. Online resources are handy, but you need to know how much kitchen or bath remodel costs in the Madison area. And don’t forget to add labor to the cost if you’re not a DIYer. A good realtor can refer reputable contractors.
- Just because you can afford a bigger mortgage doesn’t mean you should get one. When you apply for a mortgage, your lender will give you your top number of what you can afford. It’s a good idea to leave some wiggle room so if life throws you a curveball down the line, like a layoff or health issue, you are still able to pay your mortgage. The suggested ratio for housing is 28 – 33% of your gross income (including insurance and taxes.)
- There’s more to think about than the purchase price. There are many costs of home ownership outside of the purchase price. Things like insurance, property taxes, homeowner association (HOA) fees and any maintenance costs for amenities like swimming pools or hot tubs need to be factored into the bottom line. A lower priced home may have higher property taxes than another choice with a higher purchase price, so make sure you’re comparing apples to apples.
- Your student loans matter. Currently, the banks take into account your monthly loan payment amount, which if you’re signed up for an income-driven repayment program is adjusted annually. Until recently, banks and credit unions looked at the long-term payment amount, not the adjusted one that’s defined by your current income and family situation, making it difficult to get a loan. Right now, your adjusted monthly payment is what is considered, but the rules on this seem to change frequently, so you should talk to your lender about your options and be sure to have your payment plan documents on hand.
If you have any questions about any of the tips here, please call us. We’re happy to talk you through your best options and can help with the important decisions.