7 Things You Must Know Before You Buy a Home | ArticlesBase.com

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1. Does the location you are looking in have any negative impact on the home or neighborhood that you are considering buying? The three most important characteristics of quality real estate is; location, location, and location. Things to be aware of would be; backing up to a busy street or loud commercial business, an area that is known for excessive crime, or having the most expensive home in the neighborhood.

2. You must develop a monthly household budget. This is the only way that you will truly know that you have the funds to cover your monthly expenses. Develop a budget and stick with it. Adding home ownership to your monthly expenses can cut into your income more than you may think.

3. Has the seller provided a property disclosure statement? Review the property disclosure statement provided by the seller. This is very important because this is the document that the seller should disclose any repair issues or non working items in the home. If he is aware of a problem in the home he is obligated to disclose it here.

4. Does the seller have clear and marketable title? Are there any exceptions listed? Clear title means that there are no encumbrances or liens on the property when the title is past to you from the seller. If you are purchasing through the use of a mortgage than this will become a lien on the property on the day of closing. Exceptions on your title policy are not covered under the title insurance so you should be aware of what these are if there are any listed.

5. Do you have the funds to close the transaction? These need to include your down payment, your first full year of homeowners Insurance plus two additional months, and at least three months of property taxes, your closing cost and last but not least two months of your mortgage payment including taxes and Insurance. You must have these funds in the bank for the lender to verify during your application process.

6. Can you qualify for a mortgage? When you determine what your total payment will be including the property taxes and homeowners insurance you will need to know what percentage this number is compared to your total monthly income. This number is called your debt to income ratio and will control the amount you will be allowed to borrow thus determining how much you will need to put down.

7. Will this new home be an asset or a liability? If you are not getting a mortgage it will be an asset but with a mortgage a home does not qualify in the true sense of the word as an asset. Assets do not cost you monthly and they create income or increase in value. In the economy of today, homes are not appreciating therefore it is not increasing in value and it is not creating income unless, you plan to lease a portion of it out. Please review my article about the rat race and assets verses liabilities, before making this purchase.

In conclusion location and condition of the property are very important characteristics of a quality real estate investment. Having clear title with no exceptions is your best case scenario. Having the funds to close will play a part in whether or not you qualify for the mortgage that you apply for and the lender will examine your debt to income ratio. This is why developing a monthly household budget is so important. Lenders are much more careful these days than they were only a year or two ago because of the state of our economy. The most important factor for you to consider is whether or not the timing is right for you to take on the liability of owning a home. The best advice that I can give is to recommend purchasing assets before liabilities in order to create long term wealth that will help to pay for your liabilities further down the road. Living within your means is the key to survival in our present and future economy.

About the Author:

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July 30th
Filed under: real estate

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