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Home shopping can be an exciting experience for many, especially if it’s your first time. For others, it’s a stressful chore to shop for what might be the biggest purchase of your life. Whether you’re eagerly reviewing listings to send to your agent or reluctantly being dragged to every open house, here’s how to balance your budget, wants and needs to find the best home for you — and what to look out for when you finally find “the one.”
For us mere mortals without access to a never-ending stream of cash, budget is a top priority when shopping for a home. It’s a good idea to start tracking your budget now, if you aren’t already doing so, to get a good idea of how much home you can afford. Online calculators like Bankrate’s are a great starting point, but remember that they don’t account for everything — like saving up for retirement or a desire to take frequent vacations.
Your total monthly payment will include your mortgage principal, property taxes, homeowner’s insurance and, if your down payment is less than 20 percent, any private mortgage insurance you may have to pay. Don’t forget to factor in utilities, especially if your new house is much larger than your previous one.
Homebuying and homeownership both can have hidden costs you’ll need to account for as well. While commissions and closing costs can be rolled into your initial purchase costs, remodeling and maintenance expenses cannot. American Family Insurance recommends budgeting 1 percent of your home’s current market value per year for regular maintenance and upkeep.
With permanent remote work options becoming a reality for millions, your home’s location may not have to depend on an easy commute to the office. The last several years have seen a steady shift of people moving away from high cost of living areas to more affordable ones, especially in states like Nevada with no state income tax.
If you’re considering making a long-distance move, be sure to consider more than cost of living and income taxes though. Moving from Los Angeles to rural Wyoming may save you a significant amount of money, but you’ll be in for quite the culture shock when you realize the nearest Costco is 100 miles away.
Once you’ve decided on a general area you’d like to live in, you’ll need to pick a neighborhood. “For people with children, schools are extremely important,” says Kristen D. Conti, real estate broker and owner of Peacock Premier Properties in Englewood, Florida. Regardless of your parental status, other qualities, like walkability and proximity to restaurants, parks, museums and shops, should all be considered.
Features and amenities
Depending on your budget, you may need to get realistic about your desired home amenities. Most buyers think they can afford a lot more than they’re actually qualified for, says Conti. While a Southwestern-style home with a sauna, walk-in closets and a chef’s kitchen may be your dream home, it’s smart to start separating your “must haves” from your “nice to haves.”
Sit down and write down a list of what you actually need before you get to your wants. Think of not just what you need at the moment, but what you’ll likely need down the road. For example, if you have aging parents or bad knees, a single-story home may be a priority. If you’re looking to have kids soon, a modest amount of room to grow is a good idea.
At the beginning of your home-shopping journey it’s best to focus on a basic list of needs: price, location, number of bedrooms, number of bathrooms. If you’re finding a lot of homes that meet your criteria within your budget, great — that’s when you can start adding in your wish-list wants.
A knowledgeable local real estate agent is essential in this process. Agents can help guide you to a great home that meets your needs and that you can actually afford — and negotiate a deal that could save you thousands.
There’s more to consider when buying a home than just the house itself. For example, homeowners associations, or HOAs, can be a contentious topic. Some people prefer to live in an HOA community with set rules, so that all neighbors know what’s expected and no one can do things that bother others. And some people simply don’t want anyone telling them what they can or can’t do on their property.
Both sides are valid, but if you do choose a home in an HOA community, do your homework. Make sure you know what fees are required, and what they cover. And “find out whether it’s in poor financial health or preparing for an assessment,” says DJ Olhausen, a real estate agent with Realty One Pacific in San Diego. If either is the case, you’ll need to make sure you have room in your budget for potentially increased HOA fees.
Consider weather and climate-related issues as well. As wildfires, tornadoes and other natural disasters increase in severity and frequency, you’ll need to think about the risk to a potential property — especially if it’s in a flood zone. Climate risk can affect your bottom line in a big way. “Florida in particular has very high rates for insurance,” says Conti.
And if you plan to make any alterations to the home, like adding a garage or building an accessory dwelling unit out back, be sure to check your city’s rules and regulations carefully. Some areas will require inspections and permits or even have restrictions on what you can or can’t build. There may be zoning laws to consider as well.
Don’t forgo the home inspection
In extremely competitive markets, some homebuyers will waive the home inspection to make their offer more appealing. But that’s generally a bad idea. A professional inspector can uncover major problems that could cost you thousands to fix once you own the home.