August 20, 2021
What kinds of questions should you ask before you make an offer to buy your first home? There are many areas to think about when getting ready to make a big financial commitment like a mortgage.
Is Your Financial House In Order?
Can you realistically afford the home you are buying? The answer to this question goes further than whether you have enough money after your other monthly expenses to pay your mortgage.
For example, having the ability to save for your upfront expenses (down payment and closing costs) is important. But what happens AFTER those fees and expenses are taken care of?
It is a good idea to include saving some cash reserves above and beyond your cash to close–having some extra funds to help out in case times get tough is a very good thing to consider.
Not everyone can do this, but if you can you should definitely consider doing so.
With an FHA mortgage, you have options such as negotiating with your seller to have them contribute up to six percent of the asking price toward your closing costs. Not all sellers are willing to do this but it’s a smart idea to try.
Combine such help with a local down payment assistance program and you may find your upfront cash reserves are going a lot farther.
How Much Home Loan Is Enough?
Do you have too much outgoing debt to be able to afford the new mortgage in addition to your other monthly payments? That is definitely a question your lender will ask in this process.
The lender is responsible for getting your credit reports and scores, determining your debt ratio, and other financial qualifications. Working on your debt as early as possible can be a major help in this area.
Cut your debts down as much as you can before you apply for a new mortgage loan.
What Type Of Home Do You Need?
A good real estate agent can help you more efficiently if you narrow down property types you don’t want–if you don’t want a condo or townhome, be sure to mention those upfront as “no-go” properties.
The same is true if you would rather purchase in a specific type of area–some in major cities prefer to be close to services, conveniences, or even major highways (for commuting purposes).
If these are needs you want to be addressed, be sure to mention them to your realtor.
Natural Disaster Zones
Is your dream home in a 100-year flood plain? Or in an area prone to wildfires, mudslides, or heavy snowstorms?
And if you are new to the region, how would you know? Asking your lender or realtor is a great idea but you should also have a look at climate data for your region to see how extremes in temperatures, rainfall, snowfall, or other data might affect your choices.
And don’t skimp on the homeowners insurance! Natural disasters may require specific insurance policies and if you are not specifically covered by name for a certain kind of disaster or problem you don’t have any protections.
For example, your insurance policy may cover certain kinds of water damage, but if “rising water” isn’t mentioned by name in your policy, you may not have actual flood protection. Be sure to ask about such coverages.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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