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Things you Really Should Know Before Buying a House

Article Summary: Learn how to negotiate a mortgage, evaluate a house, build a list of criterias for your dream house and get your house almost for free.

Knowing what you are getting yourself into will help you get better prepared, avoid costly mistakes, find better deals and, most importantly, get the best help.



Being prepared will guarantee that you ask the right questions which will in turn show you did your homework and, by itself command respect and quality services.



Be careful what you which for as you just might get it!

Too many homeowners have been taken advantage of by unscrupulous mortgage brokers who convinced them they could spend more and buy the house they really whished for; the house of their dreams... to find out a little later, or in late 2007 if you live in North America, that their budget couldn't stretch enough to follow the rise of interest rates.

Mortgage brokers, just as loan officers by the way, are like sales people: they have quotas to fill and do receive a commission on the loan they are getting you to sign.

I hope this does give you perspective if and when you are offered a loan for a higher interest rate or for more than you think you can afford as it's your family's home you are risking here. It just might be worth it to wait a little and fix whatever problem, whether it be your credit score, your credit ratio or your work history, so you can get safer and cheaper financing opportunities.

I hope I don't offend anyone when I say you shouldn't trust loan officers any more or less than any other sales people: most of them are good, honest and hard working individuals but they can't humanly be 100% impartial when they gain to benefit by getting you to sign for a mortgage that's just a little higher or at a bit of a higher interest rate, which brings me to point number 2.



Interest rates are negotiable.

Long gone is the time when you could get a lone based on your reputation and your relationship with the bank's manager.

Computers have made this much more impersonal and credit scores are now the key to your house (I couldn't resist this one).

To make a long story short, gone is the time when you had to beg for a loan. To financial institutions, you are a paying customer and therefore, you should behave as such and see this as any other type of transaction in which a sale takes place: you should visit at the very least 2 different money lenders but ideally 3 and then make them compete for your business so you can get the very best deal.

Doing this could end up saving you thousands of dollars or shave years off your mortgage.



Nothing ever costs what we whish it did.

Before you visit your lender, make an optimist, a pessimist and a realistic budgets.

Be aware of how much you can afford to spend monthly for your lodging including: taxes, insurances, expenses such as landscaping, snow removal, pool maintenance, repairs, decorating, utilities... and factor them in your payments.

Your lender will suggest numbers but this is one of the two most important times to keep a cool head and remember your homework.

You may or may not be able to afford exactly the house of your dreams but remember that:



Houses do evolve with time.

Maybe you can afford your dream house and that's fantastic but if you can't, keep in mind that you can, in the future, get the house you can afford to look and feel and be the house of your dreams, especially of you have access to a little sweat equity.

It's always time to add a new patio, to replace the windows or to buy a spa...



Houses do evolve with time (and sometimes very quickly).

So your stepbrother has visited the house and told you it was fine and that you should save a couple of hundred bucks and not get it inspected, especially since it's only 3 years old? WRONG!!!

Professional house inspectors are trained to look for details usually overlooked by regular home buyers such as insulation, traces of moisture, suspicious cracks, electricity and plumbing. They can also usually give you an idea of how much it would cost to bring any of these up to code.

Finally, a good inspection done by a professional can usually pay for itself by using it as a bargaining tool.



Shrink your mortgage.

How many payments are there in a year? The answer is it depends.

If you pay monthly, there are 12, if you pay bi-weekly, there are 26 (or the equivalent on 1 extra payment / year) which goes a long way to reduce your capital, especially in the first years, when most of your payment goes on paying interest.

Do you have a little extra cash in the end of the month?

Even ridiculously small amounts, applied monthly on your capital will save you thousands of dollars when done over 10, 15 or 25 years. Make sure when you choose your mortgage plan that you won't get penalized for doing so and that you tell your lender to apply the money to your capital as using it as a little deposit towards your next payment often even get you any interest, let alone help in any way.




Owning real estate does have it’s advantages.


Choices: as the owner, you can decide whether to select a building that matches your current needs, has enough room for future expansion or maybe is large enough for you to lease parts of it.


Equity: every month, your payments are applied to paying down your mortgage and building some equity which could be useful eventually to secure a loan for new equipment, to finance an acquisition or simply as an asset.


Appreciation: not withstanding any unforeseen occurrences, your building should appreciate with time. This appreciation could, just as the above mentioned equity, be used to get better financing conditions.


Power: as the landlord, you are the person in charge of deciding how to finance the building, picking the tenants, choosing the decorations, selecting entrepreneurs for the work to be done, improving the building. You even have control over your rent’s rate.



You make your money when you buy, not when you sell.

One extremely important factor to consider before making your decision is that you make your money when you buy but realize it when you sell.


Paying more than the fair market value, not taking into consideration your cash flow factors (mortgage, interest rates, insurance, taxes and repairs VS incoming rent, other income possibilities such as parking for example) or letting your feelings dictate a purchasing decision may negatively affect your exit strategy for year if you are not careful.

Though appreciation is quite probable, I suggest you don’t factor it in when crunching your numbers: if the deal is still a good deal without factoring in appreciation, you are likely to make a favorable ROI (return on investment) when you decide it’s time to go for your exit strategy.

If you absolutely need appreciation to justify your purchase, be extremely careful as no one really knows what will happen in the future and, in the present, you may be paying too much.

Discuss the situation with a real estate agent know for his or her integrity such as Anne-Marie Perno with whom I often do business ( I will include a link to her website in the resources box below).



Pay off your house in 12 year: doing this you could actually get it for free.

If you understand but most important if you use my preceding advice about crunching the numbers before you buy and only buying a house that makes sense financially, then sell the house after 1 year in Canada, 2 in the US and repeat the process 5 more times, you could very well end up with a paid for mortgage and your dream house.

This is something worth looking into, especially with the:



Tax advantages of flipping houses.

Since I’m not a CPA and that all situations are unique, I strongly suggest you meet with a competent financial advisor who will help you evaluate your particular situation.

For now, keep in mind that in most situations, you will be able to use some of your expenses as depreciations to reduce your taxes or some of the rent as a personal income.

What I do know for a fact though is that in most places, you can keep 100% of the profit (the difference between purchasing cost including cost of renovations and selling price) if you obey to some guidelines such as not doing it more often than once every 1 or 2 years depending on where you live and, in some places, reinvest your profits in purchasing a more expensive property.



Choosing your home.

Usually, this is the second time when you should keep a cool head.

Questions you should ask yourself here are:

is this going to be your house for the next 50 years or is this a stepping stone towards your dream home?

how is the commute between your house and your work?

is this house going to fit your family's needs in 2, 5, 10 years?

can this house be improved cosmetically with minimum effort and would this considerably affect it's resale value?

is the neighbourhood's reputation going to change in a foreseeable future?

where are the drugstore, grocery store, bank, video club, restaurants?

is there public transit available?

will the flooring cause your kids to have allergies?

how easily can this house be maintained?

the most important question of all: do you actually like this house?



Bonus question: will this house fulfill your entertaining needs?



You must like it if you don't want to grow to hate it.

Buying a house does require your whole family to make some sacrifices. You have to like your house, at least a little, if you don't want to resent each payment.

Watch home makeovers or hire a professional to help you make your house appealing to your senses as this can often be done for little money and make a tremendous difference in how you fell every time you pass your front door.



You can't know it all nor should you have to.

Surround yourself with trustworthy advisers such as an accountant, a lawyer and a real estate agent who has a reputation of integrity and good negociation skills.

Choose advisors you are comfortable with as you will have to share some intimate information with them.



And finally.

Have fun as this should, if done right and with good advisors, be a very enjoyable process!



Good luck with your purchase.

Article Source: http://www.upublish.info

About the Author:
Sebastien Prince
http://www.laurentides-st-jerome-tremblant-immobilier.com