My wife and I have been living in our current home for almost 7 years now. We built the house from the ground up back in 2006, and at the time the house was definitely an upgrade from the townhouse that we were living in. It gave us substantially more space, more bathrooms, a basement rec room, and an extra bedroom. It’s been a great house in a great family-oriented neighborhood.
Even though we’ve loved living here, we’re starting to feel like it’s time for us to move on to something a bit different.
We had our first child this past year, and he just turned one this past month. Having a child is a life-changing event, and it certainly has been that way for us. We’re now thinking that we’d like to have a bit more space in the house and that we’d like to have a bit more of a backyard – something we really don’t have right now since we live in a neighborhood with mostly townhouses and detached townhomes (like ours).
So now as we’re slowly looking around to figure out what we want to do, today I thought I’d talk about some of the things that we’re considering before we buy or build our next home.
Things To Consider When Buying Or Building A New Home
- Consider how much you can sell your current home for: We’ve lost probably 50,000 on our home in past 5 years. We’re not underwater, but we’ll only get a few thousand out of our house – if that. Because of that we’ll need to think about how much we can save up for a down payment, and whether we’ll have to put down less than 20%. If we do, we may choose to wait.
- How much home can you afford?: We don’t want to get into a house that is more than 25-30% of our income. We don’t want to be house poor and we don’t want to have our house payment be a burden. Because of that we’ll figure out what is the very top of our range, and try to hit well below that figure.
- Don’t forget the hidden costs of home ownership: When buying a new home, and signing up for a mortgage, don’t forget that the mortgage isn’t the only thing you’ll be paying. There are also association costs, lawn care, utilities, maintenance and more.
- Do you have a 20% down payment after figuring in sale of current home to avoid PMI?: We’ll be close on this one currently since we’ve lost so much value in our home, but we’ll probably be able to scrape this together.
- What type of loan will you be getting? 20yr or 30yr? Fixed or ARM? Figure out what type of a loan you want and are comfortable with, and get pre-approved before you start looking. For us we’ll be doing a fixed rate in either a 20 or 30 year mortgage.
- Location, location, location: make sure you like the neighborhood where you’re buying or building. Go through the area at different times of day. Listen for loud noises, watch for bad neighbors and just keep a close eye out for problems. Also consider where the home is located, and whether it is convenient for your places of employment, place of worship, etc.
- Know what homes or lots in that area are selling for (not what current listings are asking): Make sure you do your homework when it comes to the pricing of homes in the area. Make sure you’re paying what the home is actually worth.
- Don’t be in a hurry, take your time: If you are able to, take your time in searching for the right home, or the right lot to build on. When you are in a hurry you’ll often be less than happy with the result of your search.
- Don’t fall in love with a house, or idea of a house if you can’t afford it: When you’re searching for a house or thinking of what you want to build, try not to fall in love with a house that is out of your price range, or think about building one with options you know you can’t afford. It will only make you unhappy. Stick to what’s realistic, and be content with that.
- Know what things you want, and what you’ll compromise on: When you’re making up your wish list for a home you’re building, or one you’re looking for – make sure you know and agree on what options or items in the house that are “must haves” and which ones are optional. If you don’t agree on that beforehand it may turn into a point of contention.
The things above are just some of the things we’ll be considering when we look into buying or building our next home.
What are some things you’re looking at before you buy? Tell us in the comments.
#3 is a big one, probably not as much for someone who has already been through the process, but particularly for the newbies. It’s amazing how much more the monthly cost of owning a home goes over and above the mortgage payment alone. I just took my own experience to write The Costs of Home Ownership: What They Don’t Tell You and I have to admit that when I go through the process again, I bet I’ll still be a bit overwhelmed.
Peter,
Great tips. I’m all about location, location, location on that list. A lot of my friends bought homes in a suburb 20 miles west of where I live. My friends thought they couldn’t afford a central location, so they didn’t even bother looking. They paid a little bit less than what I paid (I’d say about $10k on average) but there aren’t any jobs where they live. They end up driving a minimum of 1-2 hours a day just commuting back and forth from work.
I got lucky. I spend 30 minutes commuting (on a bad day) back and forth. I’m no more than 20 minutes away from downtown and all the great shopping, parks, etc on this side of town.
The moral? Don’t automatically assume that you are priced out of a certain area without looking. You’ll thank yourself in the long run.
I agree. Look where you want to live, you may be surprised and find something in your price range..
I think you also need to factor in what you’ll need to spend outside of the base purchase price. If it’s a new home, you’ll need to pay for landscaping, window treatments, etc. If it’s a current home, there might be things you need to replace or repair or refinish before moving in, and you need to account for all those costs up front. No need to be overwhelmed before you even move in, that’s no way to enjoy your new home!
I’m currently house hunting. Things I’m not willing to compromise on: three bedrooms, a yard, and an unfinished basement (or extra kitchen space) for homebrewing.
All great points! For us when it came to features, it was mostly about location, privacy, and outdoor space. Because you can always upgrade the home but it’s very difficult to change your surroundings.
Of course, the other biggie is price. We’re firm believers in putting down 20%. If couldn’t have done iit then we would’ve waited. Been saving like crazy for years.
The 20% our current house is basically gone. Instead of waiting for a market that will probably never truly come back, we decided to rent our home. God gave us the courage and wisdom to take this leap forward. Knock on wood but so far so good. Our tenants have been a blessing.
Good luck!
Location, privacy and outdoor space, all things we’re looking for in our new place as well. Of course we’re in a place where we can take our time looking so hopefully we’ll find just the right lot or home. We’re going to do our best on the 20% down as well.. I know what you’re saying on the 20% from our last home purchase being gone – since we live next door to your rental house – we feel your pain!
One tip that I have (unfortunately) learned from personal experience is to make sure that you hire someone to check out the air conditioner fully. Our inspector told us that the a/c in the unit we were thinking about purchasing wasn’t working optimally, but that it would pretty certainly be okay with a freon refill. He didn’t seem to have any concerns about the a/c, and so we didn’t.
A couple months after we bought the place, the a/c stops blowing cold air. After hiring somebody to inspect the roof unit, we learn that it was too far gone with rust to refill the freon, and that we’d just (!) need a new unit (a $6-7K investment, on the low end).
While we probably couldn’t have gotten the seller to lower their asking price if we had had the unit inspected (we purchased a short sale), my wife and I might very well have walked had we known that the a/c was in as bad shape as it apparently was. All we can do now is chalk it up to a (quite costly) learning experience.