Home Buying Tips

Considering buying a new home?  Dave Ramsey suggests a few helpful tips for those getting started.  Check out the section on Dave's website "Home Buying Tips" for more information.

Step 1:  Evaluate Your Finances

Before considering buying a house, you may want to get your finances in order.  Buying a home is a blessing but can be quite a financial commitment, so consider having a fully-funded emergency fund before anything else.  Also, ask some important questions such as 1) Can I make a 10-20% down payment? 2) Can I afford a 15-year fixed rate loan? 3) Can I keep the house payments below 25% of my monthly income?

Next, in order to increase your chance of getting the best deal when buying your home, try getting a pre-approved mortgage.  Taking time to compare offers from trusted mortgage providers can make sure you stay within your price range and allow you to make an instant offer when you find the perfect home.

Also, remember to consider the extra costs involved with owning a home.  Home owners have added expenses of property taxes, utilities, insurance, and more.

Step 2:  Call The Pros

Start by making a list of features you would like in your new home.  A new house is a significant financial AND time investment, and you and your family will want to be happy for many years to come in the new place.  Having a good idea of where you would like to live (city, suburbs, country), how many stories/levels you want, if you want a garage, walk-in closets, and backyard size are just a few considerations to pass along to your buying agent.

Next, find the right buying agent to help you buy your house, to help you save time and money.  A good buying agent could  be someone who only takes commission from the seller of your house and does not charge you, someone who makes sure you never pay more than you should by representing you well in price negotiations, and someone who makes sure all the appropriate paperwork is completed.

Also, take time to find the right home inspector in advance, so when you find the perfect home you will already have someone to inspect it for you.  A good home inspector could be reliable, come highly recommended by people you know, have solid references, and a good background.  The home inspector you pick could have a broad knowledge of home systems and structures and a long history in the inspection business, and should also be independent and have no connection to the seller.  Finally, you may want to make sure your home inspector will give you a complete report.

Step 3:  House Hunting

Location of your new home may be very important, not only now but in the future.  Unless otherwise planned, you may eventually want to resell your house, and you might want it to be in a good location.  Some considerations to make regarding location include 1) How close is the home to your office? 2) Is the home in a good school district? 3) Is the home conveniently located near shopping centers, churces, etc? and 4) Is the home in a low crime area?

 

Also, remember that not every seller may own up to the physical details that need to be fixed.  Consider getting the home inspected early in the process, and possibly hiring an independent inspector to objectively view the home inside and out.  Then consider including anything the inspector finds that needs to be fixed (plus the estimated costs) in the final contract.

Step 4:  Close The Deal

Before making the final moves to buying your home, consider getting a property survey, which could reveal boundaries, easements, encroachments, and other legal concerns which could alter the value of your home and property in the future.   Common issues (such as your neighborhood lots having Public Utility Easement) could allow a utility company to, for example, place a large electricity pole in your front yard, thus changing your home's value.

 

Now is the time to consider utilizing the home inspector you may have already picked.  The inspector may examine the home's condition and look for problems you may not have noticed, with key areas including the roof and gutter, house foundation, basement, and crawl space, heating and air condition systems, electrical systems, plumbing, kitchen counters, cabinets, faucets, etc., and bathrooms.

 

Once the home has been inspected and you are ready to make an offer, this may be the time your buying agent could come in most handy.  The buying agent should have access to a wide variety of information to keep you on track for offering the right amount to buy your home.  When negotiating offers, it may be best to keep the communication going through your buying agent, because they could be your best advocate and your best advisor at this point.

 

Finally, before you sign the mortgage and make the long-term commitment of buying (and continually paying for) your house, you may want to re-evaluate your mortgage to your financial capabilities.  The recommendation is a 15-year fixed rate, with your down payment at 10-20% of the home's value, and your house payment less than 25% of your monthly, take-home pay.

 

This article was written based off information provided by the section "Home Buying Tips" on Dave Ramsey's website (click here).

Quiz: Do You Know the Keys to Financial Security?

The following quiz has been designed based on economic journalist Knight Kiplinger’s “8 Keys to Financial Security”, an enlightening publication with Kiplinger’s own personal financial wisdom.  The article was first introduced in 1997 in the 50th anniversary of Kiplinger Magazine, and again in both 2002 and 2008.  Along with being an economic journalist and active philanthropist, Kiplinger is the Editor in Chief of Kiplinger Washington Editors in Washington D.C.

1. Where should your money be spent or invested first?
a. Giving money to my children
b. Investing in myself
c. Paying off debts
d. Increasing my investment portfolio

ANSWER: (b) Investing in myself.  Developing and increasing your knowledge and skills through continuous education and training should be considered your most valuable asset, since this will ultimately determine your overall earning power.

2. What is one of the most important items to acquire as you move forward in life?
a. Stocks/bonds
b. A house
c. 401K
d. Insurance

ANSWER: (d) Insurance.  Prior to investing in financial assets, make sure you have enough insurance to cover the big risks in life such as serious illness, disability, or early death.  If an emergency arises, insurance will take care of it and you will not have to dip into your financial investments as much.

3. What items should you purchase using borrowing methods (credit)?
a. Everything should be purchased with credit
b. Low price, short-term items that you can pay off quickly, such as clothing, travel, and entertainment
c. High price, long-term items such as education courses or a car or home
d. You should never borrow or use credit

ANSWER: (c) High price, long-term items.  Use your borrowing methods wisely to purchase investments of lasting value, and make sure to pay off as much as possible as quickly as possible to avoid interest fees.

4. In what order should your payments take place?
a. Investments, savings, bills, credit card
b. Credit card, investments, bills, savings
c. Savings, bills, credit card, investments
d. Bills, investments, credit card, savings

ANSWER: (a) Investments, savings, bills, credit card. Trim and prioritize your spending so that you are able to pay into your mutual fund, money market, or brokerage account first so these investments can continue to grow.  Then add money to your savings account/emergency fund and pay all of your regular monthly bills.  Finish up by making a payment toward your credit card or other debts.

5.  What is the best method to investing?
a. Take big risks; the more times you swing, the more homeruns you will hit.
b. Take moderate risks; you hit some and you miss some.
c. Take a risk and swing only when you think the time is right.
d. Don’t take any risks at all; you can’t lose if you don’t play.

ANSWER: (b) Take moderate risks.  Use dollar-cost averaging to invest regularly in markets whether they seem good, bad, or indifferent, and maintain the patience to wait out the occasional bear market.

6. What should be included in your investment portfolio?
a. Strictly liquid assets, such as savings and cash accounts
b. Only safer investments like bonds and CDs
c. Only high return assets such as stocks and high-yield bonds
d. All of the above

ANSWER: (d) All of the above. Successful investors know that each asset category will perform at some point, and on the reverse, each category will also have a time of lull.  Having a diversified portfolio with all of these types of assets will ensure the best performance over the long-haul.

7. Which famous quote should be your personal money mantra?
a. “We are what we repeatedly do; excellence, then, is not an act, but a habit.” –Aristotle
b. “I’d like to live as a poor man with lots of money.” –Pablo Picasso
c. “You only live once, but if you work it right, once is enough.” –Joe E. Lewis
d. “A penny saved is a penny earned.” –Benjamin Franklin

ANSWER: (a) Aristotle said it best.  Saving money is always a good idea (Franklin), but making investments allows for growth you wouldn’t otherwise experience.  Also, you shouldn’t have to feel as if you are living in poverty (Picasso), but living beyond your means (Lewis) is not the right concept either.  Instead, get in the habit of making consistent and informed financial decisions on a daily basis, and you can lead an agreeable lifestyle while keeping your long-term goals achievable.  If you need to, look closely at your current lifestyle and budget, trim back dispensable spending, and invest and save on a regular basis.

8. How generous should you be when giving your time and money to others.
a. I should occasionally give a small amount to others
b. Giving to others should come first
c. I shouldn’t give anything to others
d. I should give what I can afford to give, when I can afford it

ANSWER: (d) I should give what I can afford to give, when I can afford it.  You own financial security is connected to the financial, physical, and spiritual health of others in your community, in our nation, and in our world.  Sharing your good fortune by donating your money, time, and talent helps to create a stronger economy and a healthier, safer world, which benefits us all in the long run.