Buying a house is a significant milestone in life. I remember when I bought my first property—I had no idea what I was doing and made a few mistakes. On my second purchase, I nearly ended up without a place to stay for a few days because I underestimated how long closing would take. Now, I’m in the process of building my own house on a plot I paid for in cash in Colorado. Even though I expected this project to be the smoothest one, there were still a few surprises along the way.
So, what does it take to buy a house? First and foremost, patience. We’ve all heard horror stories about people rushing to buy a house and ending up losing money for various reasons. Take your time, especially if it’s your first purchase. Start by figuring out how much house you can afford. Most lenders will agree to a debt-to-mortgage ratio of around 50%, meaning half of your disposable income, after other loans or debts, can go toward mortgage payments.
But remember, a mortgage payment isn’t just what you see on mortgage calculators when you input the house’s purchase price. You also need to consider property taxes, insurance, and PMI if your down payment is less than 20%. Even a small difference in the interest rate, like 0.5%, can add up to thousands of dollars over the loan’s life. If you have a low credit score, it might be wise to wait a few months and rebuild your credit before applying for a mortgage.
The amount the bank says you can afford might differ from what you can comfortably afford. Every household is different—maybe you help a family member financially every month, or maybe your new house is further from your job, adding $200 in gas expenses. Make sure your mortgage is affordable. It’s better to compromise on a smaller home than to risk repossession because you can’t keep up with payments.
Consider if you’ll still be able to afford your mortgage if your spouse loses their job, if interest rates rise to 8%, or if you suddenly need an extra $500 a month for your child’s college or to support an aging parent.
Once you know how much you can comfortably afford and your lender agrees, it’s time to go house shopping. This is an exciting part of the process, but there are many factors to consider. What are you looking for in a home? How far is it from work? How important is the quality of the school district? Could you easily recoup your costs if you had to move 2,000 miles away? If not, could you rent it out and cover the mortgage? What’s the cost for renovations and repairs? Will you hire someone to do them or take them on yourself? How much are the HOA fees and other expenses?
Working with a great real estate agent can make a huge difference. Ask for recommendations or look up reviews online. Buyers don’t pay for agents, so take advantage of their expertise. They can point out things you might miss during house hunting.
It’s important to define your needs and budget ahead of time to stay on track. Sure, a guest bedroom would be awesome, but can you afford an extra $30,000 just for family to visit a few days a year? Remember the times you overspent on eBay because you got carried away by the auction? It can have much more serious consequences if you do the same with a house.
Once you’ve found the right house, go back to your lender to secure financing. Having a pre-approval should make this go smoothly unless there’s something you didn’t disclose. During this time, you’ll also conduct an inspection to ensure everything is as described. Don’t hesitate to walk away if you’re not satisfied or ask for a discount from the seller.
Spending a few hundred dollars on a professional inspection can save you thousands if you catch something you would’ve missed. It’s money well spent.
Allow about six weeks for the closing process. Make sure you can stay in your previous home until closing, as moving in with friends or family temporarily can add stress to an already busy time.
Buying a house is exciting and one of those once or twice in a lifetime projects. Surround yourself with the right people, and everything should work out just fine!