You’re ready to own the house of your dreams. But before you make an offer, it pays to ask some key questions. If you’re armed with the right information, it can help you feel more confident that you’re making the right move on the right house.
As you prepare to buy a home, here are seven questions to ask before you make an offer.
What’s my total budget?
You may think you know the right price range to match your income and assets, but there may be other costs you hadn’t considered.
“What we have found from our profiles of buyers and sellers is that when potential buyers start to look at homes, they go online. But they don’t necessarily know how much they can afford,” says Jessica Lautz, managing director of survey research and communications for the National Association of Realtors.
Consider other payments that may come up beyond the initial price of the home. Renovations, repairs and cosmetic changes all may have to be factored into the cost. Get an estimate of your monthly mortgage payments and see how other costs will factor into your budget.
“Do you need appliances, blinds, or flooring? Make sure that those items are still within your budget so that you are not walking into more debt than you are ready for,” says Carrie Niess, business analyst with American Financing.
Is your financial house in order?
Even if you think you’ve found the right house at a price that suits your budget, you’ll still need to show that you can close.
“Before you make a purchase offer on a home, it’s important to get preapproved for a mortgage. Not only will a preapproval tell you how much home you can afford, but it shows a seller that you have the means to buy their property and can close the sale quickly,” says Laura Adams, senior insurance analyst at insuranceQuotes.com.
Check your credit score https://my.bankrate.com/ to make sure you’ll get preapproved by a lender. Even if you show enough income, a blemished credit history may disqualify you from the best rates.
What kind of mortgage should I get?
Don’t know whether a 15-year or a 30-year loan is right for you? What about a fixed-rate or variable-rate mortgage? There is no one-size-fits-all mortgage and the various terms and differences between types can be overwhelming.
Choosing a knowledgeable loan officer can be paramount to helping you get the best loan for your needs, says Henry Brandt, branch manager for Planet Home Lending.
“It’s really critical for a borrower to find a good loan officer that knows all the products available so they can help you meet your wants and show you how to get there,” he says.
What are the actual costs due at closing?
“There’s more than just the down payment. You also have to have the funds for the closing costs,” says Brandt.
These costs may include attorney fees, real estate agent commissions, home inspection bills, and title insurance, all of which are typically due at the time of signing.
Buyers may also have to be prepared to hand over more money beyond these one-time fees depending on how they’re financing the purchase.
For example, according to the National Association of Realtors, the typical first-time home buyer usually pays 5 percent of the total cost of the loan as a down payment. But anyone who puts down less than 20 percent is almost always required by their mortgage lender to take out mortgage insurance, which requires additional funds to be put into an escrow account at closing.
What’s in the house’s history?
What if the home you wanted to buy looked perfect, but had a history of termite infestations? As a buyer you should know if there was any previous damage to the house before you make your offer.
“Always request a copy of the C.L.U.E. (Comprehensive Loss Underwriting Exchange) report from the seller. This little-known database maintains all insurance claims for homes and vehicles. It allows you to see what claims were filed on the property for up to the previous seven years,” says insuranceQuotes.com’s Adams.
How much should I offer?
When it comes to making your offer, it can be a bit of a cat-and-mouse game. Make too low of an offer and you risk losing the home to someone else. But offer too much and you could end up overpaying.
Your buyer’s agent should tell you the prices that comparable homes in the area have recently sold for, along with high and low ranges for a particular property so you can try to price your offer right the first time.
Find out how much time the seller will need to respond to your offer so you can be prepared, if necessary, with a counteroffer that fits within your budget.
“Know that you may have to make multiple offers, but a professional can help guide you through,” says the National Association of Realtors’ Lautz.
How can I make my offer stand out?
“If you want your offer to win, it can be a good strategy to put a compelling story together, and send a personal note,” says Dave Mele, president of Homes.com. Mele advises getting to know the sellers and sharing with them your vision of how you’ll enjoy the home. He says this can make the difference between your offer being accepted over someone else’s.
“It allows you to connect with them emotionally and that can actually trump the finances in the right situation,” he says.