21 Feb Things You Should Consider When Purchasing A House.
Some of my clients want to purchase a home now. The interest rates are low and because of the economy your dollar goes further than it did in years past. They are too excited and as a result they are letting their emotions control their decisions instead of thinking logically. I advise my clients to step away from the house emotionally and think critically about several questions before making the final decision.
I ask these questions because there is more to purchasing a house than just establishing a mortgage. A mortgage will certainly purchase the structure and the land but what happens after that?
If you are purchasing a house I want you to consider these questions.
1. How old is the air conditioner, furnace and water heater?
Why does this matter? If any of these items were ready to go out, would you have the money to replace them? A water heater runs about $300-$600. Air conditioner and furnaces can run anywhere between $1,000 and as high as $10,000 depending on the unit and what needs to be done.
2. How old is the roof?
The age of the roof is critical. Does it leak? Does it need to be repaired? Do you know that you can be refused insurance if you do not have the roof renewed? In most cities you can only have three layers of shingles on the roof. At that point when you have the roof replaced you have to pay to remove the old layers and pay to put the new layers on. The cost of a new roof is around $3,500 but the cost varies depending on the size of the home and the type of shingle that you want. Now keep in mind if the cost of the new roof is $3,500 and you are having to tear off layers the total cost is now $7,000. If this is true can you afford to replace the roof?
3. How old is the plumbing and electrical in the house?
Depending upon the age of the plumbing and electrical you may need to have things replaced around the home. For instance in my home the plumbing is 30 years old. One day the pipe under the sink broke. Luckily I was home and turned off the water until the plumber arrived. When he replaced the pipe he advised that I should have a shut off valve on each floor. So not only did I have the cost of the pipe replacement I had to pay for a shut off valve. The cost was around $500.00.
4. How big is the yard?
Do you have the time and energy to maintain the yard? If you do not and the yard grows out of control you will then have code violations to deal with. The cost of the yard maintenance and the tools to perform that maintenance should be considered.
5. Do you have furniture to put in the house?
I have some clients that have invested their life savings in the home of their dreams but they have no funds with which to furnish the house. They are literally sleeping on mattresses on the floor instead of a bed because they cannot afford a bed.
6. Do you have to pay real property tax?
If this tax applies you will have to pay this on a annual basis, generally in December each year. If you do not pay this for a certain period of time the county can foreclose on your property. Check with your country because the foreclosure rules will vary county to county.
7. What is the insurance going to be on this property?
Check this out first so you have an idea and keep in mind your insurance maybe high if your FICO score is low.
8. Have you considered the down payment and closing costs?
The down payment is the payment that you may need to purchase the home. This is generally a % of what the total loan will be. Closing costs could include the appraisal fee, inspections, recording fees, etc… You need to know exactly how much you need to come to the closing with. Ask questions.
Here are some resources for the home buyer;
Fannie Mae resources part I.
Fannie Mae resources part II.
Ginnie Mae Homeowner News.
I am not saying that one should not purchase a house but rather do your homework before making that decision. Remember the knowledge is power and the more knowledge that you have about purchasing a house the more likely that the house will become your home.
Written by Kansas City Missouri Bankruptcy Attorney, Rachel Lynn Foley.