I fell in love on the drive by. The front door was open and I could see all the way through the house to the gorgeous trees in the backyard.
It had no houses behind it, backed only by a beautiful city park with several acres of green space. As a nature lover, and an introvert who likes her space, this was the “perfect” house.
And I hadn’t even walked through the front door.
We had been waiting for an offer on our town home and it just so happened that we got an offer the week this “perfect” house went on the market.
Though it was priced at the top of our bank pre-approval amount, it was below the county’s assessed value and a bargain compared to other properties in the same neighborhood.
We understood the bargain price after our first showing. The living room carpet had a big bleach stain, the basement smelled like cat pee, and the siding, plus a few of the windows, were rotting.
Our real estate agent’s handyman performed a sort of free “inspection” to inform us of major things that needed done immediately and how much they would cost.
Although this gave us some pause, we loved, loved, loved the location and knew this was “the one”.
Our plan was to scrape up enough money to do the minimum work necessary and then chip away at other repairs as time and money allowed.
During the first few years in the house, we had a negative net worth, thousands in student and consumer loans, and were continually putting all extra cash toward necessary repairs.
In hindsight, it wasn’t the best money decision we ever made but, even though it cost a ton of sweat and cash, valuable lessons, DIY skills, and priceless memories were built in that house.
The hidden emotional side of home buying
In the search for a new home, we picture our life in each home, take in the smells and sounds and possibilities it holds.
Initially, we rely strictly on feelings about the home, with little regard to the other, very important, aspects of a home buying decision.
Allowing feelings of excitement to guide us is a dangerous practice, considering we are likely making the largest purchase of our lives.
The tremendous emotional impact of the home buying process can cloud judgement and, if we aren’t careful, cause us to overlook the most important factors to making an informed decision.
Before signing a contract, consider the following guidelines to help you make a more informed, and less emotional, choice.
Home Buying Guidelines
You decide how much you can afford
Taking out a mortgage for the amount the bank says you can afford is, typically, a poor financial move. Though banks look at debt you have, they do not consider other monthly expenses and financial goals.
Calculate your debt, monthly expenses and life goals (retirement, anyone?) when deciding how much to spend on a house. The general rule of thumb is that a mortgage payment should cost no more than 28% of monthly take-home income.
It’s best to be conservative, taking into account all of your expenses and financial goals before calculating the 28%, and then aim even lower.*
Keep in mind you will be paying for this home for a very long time and the higher the cost, the longer it will take.
Ask yourself if it would be better to buy a less expensive home, allowing you to pay it off sooner than the standard 30 years. (It doesn’t hurt to ask how many vacations you will have to forego to afford the house either.)
Do your homework
Study the value of homes in your area. Know the typical price per square foot and learn about historic housing prices, as well as current market conditions. Websites like Trulia and Zillow are great when you are researching property values.
When you are well informed on home values in your market, you will know when you find a house that’s a good value in your price range.
It’s exciting to go look at homes, but it’s not wise to jump on the first property you see. Take your time and look at a number of options. If you still like the first property, you can go back and take a second, closer look later.
Know what your needs are
Do you really need 2500 square feet? Is the hot tub a necessity? How much more time and money will that extra ½ acre cost you?
Houses require maintenance and repairs and take a slew of time and money. Do you have the time and cash necessary to take care of a large house with a large yard, or would you be better off with something smaller and easier to maintain?
Think about your everyday life now and consider if the extra space or amenities in homes you looking at are worth the extra cost in time and money to maintain.
Get an inspection
Don’t underestimate the importance of having an inspection. Problems that aren’t visible to the naked eye can surface during inspection, revealing the need for thousands of dollars in future repairs. Take the results of inspections seriously and don’t overlook potentially hazardous results.
When my family was searching for our latest home, rural areas were most appealing to us, but resale on those homes is poor due to their remote location. We settled on something with less space (and trees), but with a shorter commute and better resale potential.
You may think you’ve found your dream home and plan to live and die there, but life changes in ways you cannot predict. Resale is an important consideration – you never know when a job change or other life circumstance will pop up and necessitate the need to sell your home.
Remember the “perfect house” can create the temptation to ignore important issues. Don’t let your emotions lead you in the wrong direction. By following these guidelines, you can make a smart, informed decision.