Tip for Finding the right home
Finding your dream home is like going on an adventure tour; the more homework and preparation you do, the fewer roadblocks you will hit along the way.
Being well informed will pay you huge; why? Because as we all know, buying a house is a long term commitment, and a small misstep can mean losing tens of thousands of dollars. Like all big decisions, finding the right home is a process that needs research, timing, and preparation.
Here are the smart steps to take to find the best home.
Figure Out Your Needs and Wants
Start by envisioning your ideal home. Is it a two-story, four-bedroom house with a large backyard, or is it a condo downtown? Thinking about your needs and wants will help you narrow down your options and decide the type of home that is right for you.
Also what would be the optimal condition of the home, how many bedrooms, and the square footage should it have? Do you want a home that’s ready for move-in or are you okay with a fixer-upper that you can upgrade and renovate after you move in? You have to ask yourself what type of home would suit you best now and five years into the future.
Focus on the must-haves first. Think about the reason why you want to buy a home. Is it to grow a family, for investment purposes, or simply to live closer to work? Every homebuyer has a reason why they want to buy their home. What’s yours?
The next step is to define the key features the home must have based on your desired lifestyle. If you are planning to invite friends over for BBQ, or to entertain, then you need a home that matches that lifestyle.
Difference between needs and wants: Your must-haves are the non-negotiable items. For example, if you have or are planning to have children you may need a home that has enough space to grow a family in a safe neighborhood, and a good school district. Your wants, on the other hand, are the things that would be nice to get, but that you can do without. When evaluating your needs and wants, it’s important to separate the items that add value to the property from the items that don’t.
The Floor Plan
The layout of your home will affect your lifestyle as well as how much time you spend in each room of the home. So, you should take the time to visualize or even sketch out an ideal floor plan, considering the number of rooms you’ll need.
Using the above Housing Needs Checklist, writing down how many rooms and bathrooms you need as well as details about the kitchen, dining room, and basement. After you have identified the number of rooms, and spaces, think about sizes.
Your existing furniture plays a role too; for instance, if you’ve got used to sleeping on a king-sized bed, but the new home has a master bedroom where it’d be hard for your cozy bed to fit in, then that’s a home that might not work for you.
Choose the neighborhood before choosing the home
Know this – You can renovate the home, but you can never renovate the neighborhood; what do I mean by that? When you buy a home, you are buying into the neighborhood just as much as you are buying the home. So the easiest way to making sure you buying the right property is to focus on the neighborhood first.
To get started, make a list of the top three neighborhoods where you’d like to move to, and then look for homes in those neighborhoods. Focus on accessibility and amenities. Pay particular attention to school ratings, amenities, parks, shopping locations, transportation access, and future development potentials.
- Decide what neighborhoods you want to move to and look for homes only in those areas
- Decide what type of home and layout works best for you and your family.
- Make a list of your must-haves and nice-to-haves
- Make sure the target properties are within your budget
You’ve heard it before, location, location, location, right? That old but useful phrase remains true to this day. After price, location is perhaps the most important factor to consider. Think about the features do you want to see in a neighborhood as that will determine a big portion of your lifestyle. You need to consider how you will get to work, schools, shopping areas, parks, and amenities.
Find out how much house you can afford?
It’s easy to get caught up in the excitement and forget how much you can afford, or worse to go above your budget and overstretch yourself financially.
As a general rule, try to keep your housing costs below 1/3 of your gross household income; that includes the mortgage payment, property taxes, home insurance, utilities, and other housing-related costs. This means if you have a gross household income of $6,000, one-third of that is $2,000 that should be allocated to covering housing-related costs.
Because there are other costs you will still need to cover; when housing costs are higher than 1/3 of your gross income, that’s when money problems start to surface and all of a sudden you’re getting into debt.
Crunch the numbers
- Start your budget by figuring out how much monthly income you (and your partner) earn.
- Next, list out an estimate of your down payment, and housing costs; ballpark numbers are acceptable at this stage but don’t forget that grown-up stuff like utility costs, home insurance, and property taxes
- Lastly, detail and tally up all your other expenses to find out how much money you spend every month. Both, your income and how much you are spending will determine how much house you can afford.
Use a home affordability calculator
A quick, yet easy way to get an estimate of how much house you can afford is to use a home affordability calculator.
Lenders rely on affordability ratios to measure whether or not to approve a loan. The main three affordability ratios are the Maximum mortgage payment (rule of 28), the maximum total housing costs (rule of 32), and the maximum total debt payment (rule of 40)
Your maximum mortgage payment (rule of 28)
The rule of thumb is you should not spend on the mortgage payment over 28% of your gross monthly income.
As an example, if you have an annual salary of $45,000 and your spouse brings in an additional $45,000 per year, that’s a total household income of $90,000. Using the 28% rule that means your monthly mortgage payment should not exceed $2,100 per month ($90,000 / 12 = $7,500 per month * 28%).
Your maximum monthly housing costs (rule of 32)
The second rule gives insight into whether or not you can afford the total housing costs. Total housing costs include the mortgage, home insurance, utilities, property taxes and condominium fees (if applicable). Your total housing costs should not exceed 32% of your gross monthly income.
Using the above example of the couple with $90,000 annual income that means their total housing costs cannot be more than $2,400 per month.
Your maximum monthly total debt payments (rule of 40)
The third and last rule looks at your home affordability while keeping in mind your other debts. The logic is that if for example, you buy a car with a car loan, you will have lower funds available to pay the mortgage. With the maximum monthly total debt rule, your maximum allowed debt payments should not exceed 40% of your gross monthly income.
In the above example, of the couple with $90,000 annual income, their total monthly debt payments cannot exceed $3,000, which includes all housing costs, plus monthly car payments, credit cards, lines of credits, or any other monthly debt payment.
Home viewing tips
Perfectly placed art, bright lighting, cozy sofas, neatly painted walls, and mouth-watering scent of freshly baked chocolate cookies are all home staging techniques professional home stagers use to create a love-at-first-sight connection with the buyer.
However, as a prepared and informed home buyer, you should ignore the décor and pay more attention to the property.
Here are 10 home viewing tips that will surely help you keep your eyes on what really matters.
1. Use a house hunting checklist
The best way to avoid being sidetracked and ensure the home you buy is exactly what you are looking for is by using a house hunting checklist. When you view multiple homes, it is easy to forget which home had what. Using a house hunting checklist helps you to be thorough and to ensure the home you select has the features that are important to you.
2. Structural defects
Check the floor to determine are uneven parts. You can do this easily by doing the marble test – a marble should not roll when paced on the floor surface. Uneven floors can be a sign of issues with the foundation wall, settling of soil, or old supporting joists. Check the walls for cracks close to the ceiling.
3. Signs of water damage
Homes that have had previous water damage may have mold under the floors, or under the visible drywall. Look for uneven paint on the walls and ceilings or signs of re-plastering.
4. Does the house pass your smell test?
Pay attention to the smell. If the home smells odd, it’s possible there is something odd happening like a pest infestation, or mold.
5. Check the water pressure
Turn on kitchen and bathroom faucets as well as the shower faucet; inadequate water pressure may indicate problems with the plumbing or a water tank that needs replacing.
6. Test the appliances and home systems
Check the condition of appliances such the stove, fridge, washer and dryer, and ask questions about the age and condition of the AC, furnace and other home electrical systems. Ask your agent or the seller’s agent how old each of the appliances is.
7. Energy efficiency features
The cost of operating the home should be one of the most important factors to consider before committing to purchasing the home. Ask what the current owner spends on monthly utility costs, and confirm the energy efficiency of major appliances.
8. Windows and Doors
The doors and windows should open and close freely, and be winter and waterproofed. If a homeowner has taken good care of their external doors and windows chances are that they also have taken good care of the rest.
9. The living room
This is another area where you are likely to see plenty of home staging. When it comes to living rooms the most important things are size and layout. Try to see beyond the décor and focus on the functionality of the area instead, and ask yourself questions such as is the dining room too far from the kitchen? Is the space comfortable enough to spend quality family time?
10. The basement
Check for any damage to the foundation walls. If there is a crawl space take a quick peek there and spend some time looking around in the laundry room. You are looking here for anything unusual including a signs of previous water damage or the presence of mold.
11. The bedrooms
Are the closets and the bedrooms big enough? Before listing the home for sale some sellers replace the furniture with smaller furniture to make rooms look bigger than they really are.
Open the windows and listen; is there a busy road nearby? Are there stains on the ceilings? This would signal water leakage from the roof to the attic.
12. The backyard, the driveway and Curb Appeal
Pay attention to the condition of the backyard, the fence, and the driveway. Go across the street, look at the curb appeal, and ask yourself, do I like what I am looking at?
Other useful finding your home tips:
Which way does the house face?
Most buyers don’t care about what direction their house faces even though it will surely affect their wallet.
The consensus is you typically want your main areas such as the living room to face south so you get plenty of natural sunlight, and heat to warm up the home. And if you are concern about the hot summer months, you could strategically plant a tree in the front of the house; the tree will protect the home from the extra heat while providing a canopy-like umbrella; which means you can enjoy reading a book in the living room in the summer, without having a need to turn on the AC.
Take your time
Spend no less than 30 minutes viewing a home each time, but optimally you want to be there for a full hour.
Focus on what adds value to the home
Things such as having a backyard the faces a ravine or a home in a top-rated school district add value to the home whereas things such as a pool in the yard, or a custom made BBQ might appeal only to personal tastes but would have little effect on the value on the property.
Get a second opinion
It is important to get a second opinion. If you are buying with a partner make sure they like the home too. Take pictures to review later, and bring someone along to view the property with you. They likely would not be as emotional about the home as you and could provide you with a pragmatic view.
Take a walk in the neighborhood
Check out the nearby streets and other homes in the area. If you see toys in front of the house, too many cars in the driveway, or open garbage bins it might give you an indication of a declining neighborhood. Get a feel of the area; can you imagine yourself living there and visiting the nearby stores?
Go back for a second look
There are things that you will miss the first time you visit a home. Go back a second for a second look, but this time, at a different time of the day. Going back will either confirm you want the house or change your mind completely.
Ask questions – Find out all there is to know about the house
It’s important to ask questions so you can fig deep into the past and background of the property. It is better to have too many questions, and no questions at all; here are some of the questions you should ask.
- How old are the AC and furnace?
- How old are the roof and windows?
- What are the neighbors like?
- Has the home ever had water damage?
- What deficiencies does the home have?
- How long (and how often) the home changed owners?
Your best chance of finding the home you really want is taking your time to evaluate all options. When you choose the right neighborhood before choosing the home, you are halfway there; the next step will be to identify exactly what you want and do some research until you can zoom in on a property you can call home.
Complete a Home Buyer’s Online Course
Knowledge is power! To succeed in the home buying process you’ll need to know what to expect at every step of the way. You should check out our Home Buyer’s Online Course.
This is an interactive course designed in an easy to understand format; you will learn the eight steps you will need to take to achieve successful homeownership.