Things To Consider When Buying A House

For prospective home buyers, there are many things to consider when buying a house. After all, you’ll want to take a number of different factors (like price, location and regional trends) into account as you go about researching potential properties during the home buying process. As you might imagine, that also means needing to compare and contrast a number of different variables that can affect your living situation before you decide on your next residence.

Where should you get started when buying a house, though? Let’s take a closer look below at a number of points that you’ll want to keep in mind as you start to shop around and contemplate whether a single-family home, condo, multifamily apartment or other property makes the most sense for you. Not to mention, what area and neighborhood best fits your situation and/or family goals.

Key Features To Look For In A House

Naturally, there are several common areas where you’ll want to start your research. As you pursue each avenue of inquiry, be sure to take notes, compare and contrast options, and set aside time to discuss related opportunities or challenges with any family members or others who’ll be living with you. Sometimes, the decision about which home to buy is fairly cut and dried. But more often than not, it’ll require some time (and several rounds of back-and-forth conversations) to work out.

The following are several of the most frequent things home buyers should consider when buying a house.

• Location – It’s common knowledge in the industry that when it comes to property values, real estate is all about location. And when it comes to your living space and everyday comfort, don’t discount the importance of picking the right spot to reside in either. For instance, perhaps you’re looking for a quiet and isolated spot in a rural area with warm weather and easy access to lakes, ponds or the ocean. Then again, maybe a location in the heart of a thriving city with walkability to shops, restaurants and entertainment is more your speed. In short, it’s important to pick a location that corresponds with your preferred lifestyle and interests.
• Square Footage – Square footage refers to the total size of any given dwelling. The more square footage that you have, the more space that you and your family will have to sprawl out and enjoy a sense of breathing room or privacy. Then again, the greater the square footage of your home, the more you’ll likely find yourself paying in terms of your mortgage, property taxes, utilities and upkeep. Often, it’s best to pick a home that suits your everyday needs and lifestyle, so you’re not stuck paying for more square footage (aka space) than you’ll practically use or need.
• Lot Size – Speaks to how much land your home will be situated on, typically expressed in terms of acreage. A bigger lot size generally gives you more room to roam and install perks like swing sets, pools, dog runs and other outdoor features and amenities. At the same time, it also usually comes with higher landscaping demands and costs, which may be less desirable if you’re less interested in putting in regular yard work.
• Layout – Some interior floor plans are more open and spacious, others more compact and self-contained. Whether you’re looking for a big, open kitchen and sprawling bedrooms or an interior space that’s more evenly divided among other areas (like playrooms and dens) is entirely your preference. As you think about things to consider when purchasing a home, the layout of a house is important. That means having to take some time to think about where you and your family are likely to spend most of your time when indoors, and which rooms of the house are most important to you.
• Bedrooms – The number of bedrooms that a home contains is also important, as it determines the amount of comfortable living space residents will have to doze off in. But on top of that, it can further determine your ability to convert spaces of the home into offices, guest bedrooms or secondary entertainment and lounge areas. Also bear in mind that, generally, the more bedrooms a house has, the higher price and property value the residence will have as well. If you’re looking to save money on buying a house, finding one with fewer bedrooms is often a quick way to enjoy a reduction in price.
• Bathrooms – The more bathrooms, including half bathrooms (toilet only) and full bathrooms (toilet and shower), a property has, the more expensive a home will typically be priced. That’s because of the convenience that having multiple bathrooms generally creates. However, having more bathrooms can also create higher maintenance and utility costs for a homeowner, and there’s often little point in paying for an extra bathroom that often goes unused.
• Appliances – On the one hand, it’s important to think about the condition of any existing appliances in the home, such as the refrigerator, oven range, washer and dryer. On the other, you’ll also want to think about any upgrades or new models that you may wish to install, and how much space the house offers for doing so. Among other things to consider when buying a home, you may even be able to negotiate with a property seller to leave certain desired appliances behind (or take them away) as part of the property sale.
• Maintenance And Upkeep – Purchasing a home doesn’t just come with upfront expenses in the form of closing costs and the overall sales price. It also comes with added costs related to maintenance and upkeep of both the structure and surrounding grounds on the back end. Keep in mind that when you buy a home, you’ll be responsible for added costs such as repairs, service and any replacements or upgrades as well. These costs may not seem like much at first, but if the home is older, bigger or has a lot of land that surrounds it, the costs can add up over time.
• Energy Efficiency – Another thing to consider that is sometimes overlooked when buying a house is the property’s general energy efficiency rating. Because if your home is hard to heat during the winter or cool off during the summer, you could be in for a less comfortable experience … and some big power bills. Before purchasing a new house, you may want to conduct an energy audit, ask to get a sense of monthly utility costs and research these aspects of the structure and any appliances contained within.

Important Things To Consider When Buying A Home

Of course, there are a number of additional financial variables that also need to be taken into consideration. As you set about researching a new home purchase, it’s important to get a better sense of just how many recurring or one-time added expenses may be involved, and where further costs may pop up on the back end. This can impact your potential cash in hand, monthly liquidity and credit rating, among other factors.

Pro tip: While running the numbers here, don’t forget to take your individual living situation into account either. For example, if you’re planning to become an empty nester or retire soon, perhaps a house with fewer bedrooms makes more sense as a dwelling, even though you can technically afford a larger property. Similarly, if you’re a busy family with young children, perhaps you’re better off taking a property with lower homeowners association fees, so you’re not overspending on fancy neighborhood perks that you won’t utilize.

The key here is to try to buy only as much housing (and related features) as you actually need and will use. Otherwise, you could wind up overpaying.

1. Your Debt-To-Income Ratio (DTI) – All homeowners should be aware of what DTI is and how it impacts the home buying process. Expressed as a percentage, it describes your monthly gross income vs. debt payments. Reviewing your DTI effectively provides lenders with an idea of just how well you can afford the monthly payments that would be associated with a mortgage. As a rule of thumb, it’s important to keep your DTI as low as possible, with most lenders requiring it to be no higher than in the 36% – 50% range to meet loan qualification requirements.

2. Your Home Purchase Price – The actual purchase price of a home is just one of several expenses associated with buying a house. For instance, you’ll also need to pay for appraisals, home insurance and any closing costs and loan servicing fees associated with processing the property sale. Typically, certain expenses such as a down payment (generally around 20% of a property’s sale price) also need to be saved up for. If you have questions about what it costs to buy a property, and any associated commissions, you may want to speak with a licensed REALTOR^® as well. Also bear in mind that engaging in the preapproval process for a mortgage can often save you time and stress here by giving you a better understanding in advance of how much house you can afford.

3. Your Ongoing Expenses – Buying a home is just the beginning in terms of ongoing expenses for any prospective property owner. For instance, you can also count on recurring costs such as:

• Mortgage payments: If you take out a mortgage to finance your property, keep in mind that you’ll be making monthly payments to your lender. These payments account for both principal (actual sums borrowed) and interest (servicing charges) on the loan. Note that it’s important to research different financial providers and shop around to make sure that you’re getting the best deal here, as many financial institutions offer mortgage programs. Each will be priced individually and offered on different terms, depending on the provider, as well as your personal credit score and financial history.
• Property taxes: The government will also charge you for ownership of your home in the form of property taxes, which go toward the provision of public services and public safety solutions. Note that property taxes can change from year to year, depending on the value of your home, and need to be paid annually. Charges can easily run you several thousand dollars a year depending on the size, scale and location of your residence.
• Homeowners insurance: Homeowners insurance (or home insurance as you may have heard it referred to) covers interior and exterior damages to your property. It also typically provides a certain degree of coverage in the event of any damages or losses to your personal belongings and assets, depending on your policy. Some policies may further provide personal liability coverage against personal lawsuits in the event of parties sustaining injuries on your property as well. As a general rule, mortgage providers will require you to take out a homeowners insurance policy before extending a loan on a property.
• Mortgage insurance – If you make less than a 20% down payment on a mortgage, you’ll generally be required to procure private mortgage insurance (PMI). Designed to protect financial lenders, PMI helps minimize a financial institution’s risk in lending to a borrower. While it will cost you additional fees to obtain, acquiring mortgage insurance may help you qualify for a home loan that you might otherwise not have been able to qualify for.
• Homeowners association (HOA) fees – Dues paid each month to a homeowners association for the provision of neighborhood upkeep, perks and facilities. For instance, these monthly expenses may go toward paying for the upkeep of shared or common areas of your building or subdivision, or the maintenance of features like pools and tennis courts. HOA fees vary by location, and unless you feel that you’re getting good value for the money, you’ll typically want to keep these costs as low as possible.
• Utilities – Electricity, water, gas, sewer … there are many utility costs that a homeowner is liable for as well. Such recurring expenses need to be paid on a monthly basis, and failure to do so in a timely manner may result in a negative impact to your credit score. Be sure to account for these costs in your monthly budget, as you can bet that utility providers will.

4. Your Neighborhood And Its Amenities – As you consider where to live, and what home makes the most sense for you and your family, you’ll also want to make sure that you pick the right neighborhood as well. You can increase your odds of finding a good fit by taking the following variables into account:

• Quality of schools – If you have kids, you’ll want to pick a subdivision that has an abundance of good schools nearby. You’ll also want to research and determine which school district and individual schools that your kids will attend. Thankfully, a wealth of information is generally available with an online search, and a host of helpful internet messaging forums can help you connect with members of the local community.
• Community diversity – Today’s children and working professionals are more diverse than ever. As you search for a new home, be sure to research and consider how diverse your new local community is. That way, you can maximize your chances of being exposed to new and positive influences as well.
• Walkability – Is it easy to take a stroll to neighborhood restaurants, stores or leisure areas such as parks and pools, or do you need to hop in your car and drive there? Do you feel safe taking an evening stroll around your subdivision, or do you feel anxious every time you need to walk the dog? As you can see, neighborhood walkability is an important factor to consider, especially if you like running, jogging or walking to work.
• Commute to work – Knowing the distance and drive time from your home to your place of employment is also a key factor to take into consideration. After all, the more traffic and greater distance that you’ll have to cover, the more time that you’ll be spending in the car or on a subway train. Bearing this in mind, the shorter and more convenient your commute is, the more time that you’ll get to spend with friends and family.

5. Your Financial Health – Among the most important things to consider when buying a house is how the home purchase might potentially impact your overall finances. That’s because purchasing a home can lead to both significant recurring costs and occasional, but costly, one-time expenses. Before committing yourself to buying a new property, you’ll want to take the following questions into consideration, and keep in mind any hidden expenses (property taxes, insurance, etc.) that might pop up.

• What’s your credit score? Do you know and understand it, and how it might be impacted by certain factors?
• Do you know your DTI and how it might impact your ability to obtain a mortgage?
• Do you know which state, city and neighborhood makes the most sense for you or your family to buy in – and average costs of living in the area?
• Do you have a steady, dependable source of income – and have you considered how it might grow, shrink or fluctuate in the months and years ahead?
• Do you have an emergency savings account with enough to cover 6 – 12 months of unexpected costs if the need arises?
• Do you have a car payment to be aware of as well?
• Can you afford to make a sizable down payment (say, the typical 20%) on a home?
• Have you computed a monthly budget for the house, including mortgage payment, utility bills, property taxes and insurance payments?

The Bottom Line

As you can see, a lot goes into the home buying process, making it critical to take your time and do your research before committing to buying any given property. That means having to go on tours of houses, ask lots of questions and hire an inspector (or two) before agreeing to move forward with a deal. It also means having to consider the potential impact that buying a new property can have on your monthly budget and financial health as well.

Noting this, home buyers are advised to take their time and resist the pressure to buy a home before they’re ready. Interested in learning more about what other factors you should consider when shopping for a new residence or investment property? Be sure to check out more articles in our Learning Center. And if you’re ready to dive into the home buying process, you can start a mortgage application with Rocket Mortgage^® today!