Clearwater Real Estate Blog

Points to consider when buying a house

Here are some basic things to know when looking to buy a house:

The cost. Before you start looking for a house, go to a lender and find out how much money you can borrow and get pre-qualified. That will narrow your search to houses that you can afford.

The down payment. A 20-percent down payment is ideal because it allows you to avoid costly private mortgage insurance. If you can't afford such a large down payment, consider taking out a second mortgage that will effectively bring the down payment up to 20 percent. Such arrangements are often called 10-10-80 loans, which means a 10 percent down payment, a 10-percent second mortgage and an 80-percent first mortgage.

The closing costs. Once you decide on a house and a lender, make sure to get an estimate of the closing costs. If they seem high, get an estimate from another lender and compare the two. If the seller is willing to pay points for you, you can lower your interest rate.

The upkeep. Owning a house can be a lot of fun if you are a fix-up kind of person and love to design rooms and have a lot of free time. On the other hand, if your life is just one big rush, you will probably end up paying a bundle for repairs and upkeep. It's a good idea to set up a fund for such emergencies as soon as you can after you move in.

The house's value. Choose the right neighborhood and school district and your house will probably rise in value year after year. Choose the wrong neighborhood or state or time and the value of your house may plummet. In other words, economic forces beyond your control generally determine what happens to housing prices. So when you shop for a house look for something you like and can afford in an area that appeals to you and your children. Read the business section of local newspapers to keep up with local economic trends.

Economic problems. Once you own a house, make sure you pay the mortgage on time each month. This seems like simple common sense but tens of thousands of households fail to do so and go on to ruin their credit record or lose their house. When looking for a house, if you have doubts about being able to afford it, don't buy. Put off the decision until you are on firmer financial footing. And remember, there is nothing wrong with renting. It can be a good choice for those who move around a lot, can't afford to buy a house, don't want to fool with repairs or lawns or prefer living in an apartment in an urban area.

Economic rewards. If all goes well, a house can bring great economic rewards. You may find over time that your equity has grown so large that you can use it to pay for your child's college tuition. Or you may be able to sell the house and use the equity to buy a much better house. Or — well, the list is endless. In fact, a house accounts for the largest portion of wealth in most households.

FROM HGTV