Should I rent or buy a home?

If you’ve heard it once, you’ve heard it a million times: Buying a home is the smartest financial decision you can make! The old cliché is absolutely true. In almost every situation, you’ll get more bang for your buck if you buy a home.

Unless your rent is extremely low or you plan to move in less than three years, buying is probably the best choice. Why? First of all, home owners enjoy some valuable tax benefits. Secondly, if you lock in your monthly mortgage with a fixed rate loan, you’ll take comfort knowing that your housing expenses will not skyrocket in the future. Renters rarely have that advantage because their monthly rent could increase at any time. Thirdly, a home is smart investment that could yield a substantial profit when you decide to sell it down the road. That’s because the value of your home will likely increase over time.

Lastly, a home allows you to accumulate wealth and boost your overall net worth. Studies show that there is a gigantic gap between the average net worth of home owners versus that of renters. According to the Federal Reserves’ Survey of Consumer Finances, home owners with an annual income of $50,000 to $79,999 have an average net worth of $194,610. However, renters in that same income bracket have an average net worth of only $25,000. The numbers don’t lie—homeowners are typically wealthier than renters.

Why do I need a loan preapproval?

Every home buyer should get preapproved for a loan before they start shopping around for a home. Not only will it assure that you’ll be able to secure a loan when you find your dream home, but it will also give you negotiating leverage. If a seller knows you’ve already been approved for a loan, they’ll be more likely to take your offer seriously. Plus, if you’ve already been preapproved or prequalified for a certain amount, you won’t be tempted to buy a house you can’t realistically afford.

Not only does a preapproval make you more attractive to sellers, but you’ll also save loads of time during the closing process. Because your lender will complete the verification and underwriting steps during the preapproval process, you won’t have to go through those steps again at closing.

What’s the difference between the list price, the sales price and the appraisal value of a home?

The list price, or “advertised price,” is the amount the seller is asking for the house. Sellers often ask for more than what they actually hope to get—and sometimes, they ask for less. But for the most part, the list price is pretty close to what the seller wants. If you think the list price seems too high, take a look at comparable sales prices in the community. This will help you reach a fair price.

The sales price is the amount of money a buyer would realistically pay for a property. This price is often affected by market fluctuations and other factors.

On the other hand, the appraisal value is how much the property is worth according to a certified appraiser. An appraiser takes many factors into consideration, including the condition of the property, comparable sales in the area, projections for future value, any extra upgrades or additions the home may offer.

How can I make a strong offer on my dream home?

Making an offer on a home can be confusing, stressful and downright terrifying. However, with a knowledgeable real estate agent at your side, it is possible to make a strong offer that fits your budget.

Although you may be tempted to make a low-ball offer, it’s important to be realistic. Do some research, and work with your real estate agent to come up with a reasonable figure. Take a look at recent sale prices of other homes in the area. If local homes are selling very slowly and sitting on the market for months at a time, you should be able to offer less than the listed price. On the other hand, if homes are selling like hotcakes in the neighborhood, you’ll want to make a competitive offer to increase the likelihood that you’ll get the home. In this kind of scenario, you may even find yourself in a bidding war with other potential buyers.

If you’ve been pre-approved for home loan, include that information in the financing terms of your house offer. That way, the seller knows that you are a serious buyer who has the funds to back up a house purchase. This gives you a leg up on other potential buyers who have not have been pre- approved.

You should also include a property inspection clause in your home offer. Let’s say your offer is accepted, but upon inspection you find out that the house is infested with termites or the roof needs major repairs. Who will pay the thousands of dollars for repairs? With this clause in the contract, you will be able to reopen negotiations with the seller if you learn that the house needs work after inspection.

Why do I need a home inspection?

You can’t judge a book by its cover. This old saying holds true for houses, too. Even an incredibly beautiful house that appears to be in mint condition could be hiding some serious cracks in the foundation. That’s why before you purchase any home, you should hire a professional home inspector to meticulously examine the property. Buying a home is the biggest purchase most consumers ever face. As with any other major investment, you should know every tiny detail about the product you plan to buy before you sign on the dotted line.

Unfortunately, too many homebuyers think they can simply inspect the property themselves. When they don’t find any obvious issues with the property, they go ahead and purchase the house. A month or so down the road, many of these homeowners discover a major leak in the basement or termites in the attic. At this point, it’s too late. After all, you can’t return the home to the store. That’s why it’s critical to hire a professional home inspector. It takes a trained eye to spot these potential problems—and that’s exactly what a home inspector does.

How do I find a trustworthy home inspector?

Unfortunately, most states do not license home inspectors—which means you’ll have to do some homework to find a top-notch inspector. Ask family members, friends, colleagues or your realtor for recommendations.

Before hiring an inspector, you should also ask if they are a member of the American Society of Home Inspectors (ASHI). This national organization enforces a strict code of conduct and specific practice standards. ASHI also tests applicants and requires that all members have a certain amount of experience.

A good home inspector should be intimately familiar about construction practices in the area. They should also know which designs are built to last and which ones may fall apart at any moment. Plus, an inspector can pinpoint seemingly insignificant problems that could cause major headaches down the road.

BACK