Usually, the more money you can put down on a home, the better. That’s because the more you borrow for a home, the more you’ll pay in interest on your mortgage down the road. It’s easier to qualify for a mortgage if you have a down payment. Having a down payment also may help you to qualify for a lower interest rate on a mortgage, and may make your mortgage payments lower — and easier to make — once you own a home.
Determine how much you can afford
Before you set out to buy your dream home, compute how much you can afford, keeping in mind your current expenses, how much it will cost to own and maintain the home and how your expenses may grow or change in the future. There’s no sense spinning your wheels looking for that mansion when a more affordable condo is more your speed.
Weigh needs vs. wants
Sure, many of us want a home in the very best location with all the latest amenities in the latest style. But is that what you need? While it’d be great to find a place that fills all our needs and wants, often we have to sacrifice and buy a place that meets just some of our necessities and desires. So, think about what you must have (e.g., a reasonable commute to work), versus what you’d like but can do without — say, a backyard with a pool and a hot tub. Doing so will make it much easier when it comes time to go house hunting.
Have a lender pre-approve you for a mortgage. Being pre-approved means that a lender has agreed to lend you a certain amount based on your credit rating and finances. Being pre-approved puts you in a better position to look for a home — you know exactly what you can purchase, and when it comes time to bid on a home, you’ll be in a better strategic position than a buyer who hasn’t been pre-pproved.
Investigate your local market and the homes you’re considering. Knowing the strength of your real estate market (e.g., whether it’s a buyer’s or seller’s market) and the history of a home (such as when it was purchased and for how much) will help you bid more intelligently on a home, and will give you an edge when negotiating with a seller.
Get an attorney
Buying a home is a complicated process — so it’s best to recruit the assistance of an expert. A real estate attorney will look out for your needs during the home-buying process, will read the fine print and will help explain anything you don’t understand. Think of it as an insurance policy against running into troublesome real estate hassles after you’ve signed on the dotted line.
Once you find that home you’d like to buy, get the property inspected by a qualified professional and make your purchase contingent on satisfactory inspection results. By doing so, you can find out if a home is in good condition, or be alerted to any serious (and costly) problems with the home. If you make your purchase of a home contingent on your satisfaction with the home’s inspection reports, you have an out should those defects prove to be too expensive to fix.