7 Musts for Any Homebuyer

by Ron Haynes

Buying a home isn’t as complicated as some people make it out to be, but there are quite a few potential pitfalls. Buying a home isn’t like buying a lawnmower or even a car – not only is the price significantly higher, but the laws and regulations associated with purchasing real estate differ greatly from those for consumable goods. So whether you’re ready to take the plunge into home ownership for the first time or the tenth, there are several steps you must take to know if you’ve found the right home for you.

home(2) 1. Determine how homeownership fits into your budget.

The general recommendation is no more than 28 percent of your gross income should be spent on housing costs and if you exceed 33 percent, you risk becoming “house poor.” House poor means you have a huge, beautiful home but cannot afford much else. Once you determine how much to budget for housing costs, you can move on to the next step.

2. Use a mortgage calculator to decide the price range you can afford.

Try using the Mortgage Max Calculator on Dinkytown to determine how much mortgage you can take on. Remember, this calculator gives you the MAX mortgage you should have, so plan on looking at homes priced considerably less so you don’t become house poor.

3. Check prices on comparable homes in your preferred area.

“Comps” are what they’re called in the industry. They’re just basically price checks on other similar homes. If you do your own comps, make sure you compare very similar homes. Make sure they match up on:

  • Square footage
  • Number of bedrooms
  • Number of bathrooms
  • Total number of rooms
  • Lot size
  • Amenities (garage, basement, family room, fireplaces, etc.)
  • School system

The general theory is that similar homes will sell for similar prices.

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4. Calculate your monthly housing costs.

Those costs will go far, FAR beyond just the principle and interest on your mortgage loan. Count on real estate taxes, homeowners insurance, homeowners association fees, condo association fees, mortgage insurance costs, landscaping costs, maintenance costs, and repair costs. When your stove, refrigerator, heater or air conditioner dies, it comes out of your checking account (or your emergency fund).

5. Estimate your closing costs.

Buying a home has up-front costs as well as ongoing costs. Those up-front costs could be origination fees charged by your lender, title fees, settlement fees, fees for the real estate lawyer, taxes, and other prepaid items such as homeowners insurance or homeowner’s association fees. You should figure at least 5 percent of the total price as a pretty good estimate of your closing costs.

6. Go ahead and talk with a real estate agent.

Chances are pretty good that you know one or know someone who does. Just ask some simple opinion questions like: “How’s the market these days?” or “What areas are growing? or “What’s the mood amongst mortgage lenders?” Just asking a few questions doesn’t commit you but you can glean some good information by striking up a friendly conversation.

7. Look at the big picture.

Buying a home can be a great way to increase your personal wealth, but it can also be a drain on your monthly finances through maintenance and repairs. Examine why you want to own your home and be honest with yourself (there’s no reason not to). The irony of your life’s biggest purchase is that it is usually made for emotional reasons, but that’s okay. Personal finance IS personal!

About the author

Ron Haynes has written 1000 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


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