If you are lucky enough in todays economy to acquire some financing to purchase a home it can be yet another challenge finding the best deal for your money. Here are some things I have learned.
Things You Will Need
Internet or other media access
Step 1Consider the home's overall potential. If you are looking at older homes, don't be so quick to dismiss those with a little work needed. These can sometimes be the best buy. It really comes down to the cost of the home vs. cost of renovations. If the improvements are superficial, ie: cosmetic, then the value may be far more important. Superficial improvements would be new carpeting, fresh paint, landscaping, minor repairs. Older homes, while not necessarily the most energy efficient do offer usually more square footage and are, make no mistake most of time better built. New construction usually offers better energy efficient insulation and appliances, but the rest of the materials used are usually builder grade and mass produced.
Step 2Beware of Money Pits- Many homes that are older have one or two major flaws. I saw this over and over while shopping for my own home. Major repeating flaws I saw in older homes were those that had not been touched or updated since the day they were built. Beware of homes that have not updated in any way the kitchens or bathrooms. Why, well if the answer isn't obvious enough, because we all know kitchens and bathrooms are the most expensive to update. The other red flag of that situation is if a house is 30-50 years old and still has original appliances, etc. chances are the previous homeowners did not invest much in the upkeep of the home. This begs the question what else have they not taken care of???? This means possibly at any moment your water heater is about to blow, your appliances probably don't work, and your heating and air may consume so much in energy costs you will be financially unable to replace them any time soon. This is why it is key, that if you are purchasing an older home do not skimp on having the home inspected by a professional. They will go over your home with a fine toothed comb and call to your attention the red flags for potential disaster.
Step 3New construction pit falls-Just because the home is new doesn't mean it is better. Sometimes you still have a lot of issues. Some of which don't become apparent until you have lived in them a while. New constructions are often built with the speed of light, and while that may have at one time satisfied the demand, certain things may become compromised structurally in the process. You'd be surprised how many new construction homes are not built to code and do not pass inspection. On the flip side most new construction homes appraise higher per square foot to their older comparables.
Step 4Is the biggest always better? In homes? No. Well not from the investment stand point anyway. Why? Well you may have heard the term, buy the worst house in the best neighborhood. This is actually a true statement. Well..sort of. Now is the worst house full of termites and falling down and one breeze away from being condemned? In that case no, maybe not the best investment overall. However, if you find a great neighborhood in a desirable area is it wise to go for the biggest house on the block instead? Not really. The best and biggest actually will climb in value at a much slower rate than the smaller more modest home in the same area. The larger homes value is based on comparables in the area. If all of the comps in the area are much less in appraisal, then this pulls down the large homes ability to gain in equity. Now consider the modest home two doors down. Its 500 square feet smaller, and maybe it appraises for 30,000.00 less. You add 500 square feet and make improvements all around. Your home is now showing a jump in its appraisal of 25,000.00. At the same time, your pay off is still the same. You have actually gained far more in equity. In fact, now your home is worth probably close to what the biggest house is worth but it has that smaller home pay off working for it. You've gained more in equity. You should always consider such strategies when looking for homes. Always think, equity, improvements and resale value. Even in a stressed market your home is still the most important investment. Don't let a good opportunity slip through your hands because you thought a home wasn't perfect enough. Relax, you have a 30 year mortgage, are you going somewhere? Rome was not built in a day, improvements can be done over time. Stop thinking it all has to be done immediately. Also, just because the market is in a slump and you fear your home is losing value doesn't mean you should avoid making improvements. Big mistake, as long as you can financially do so and you have stable employment, make improvements. Not all of us can save 10 grand, but if you spend 3 grand and acquire 10 grand in equity, you have made some money that can mean a cash out refinance in an emergency, or if you wish to simply refinance at a lower rate, this means a more favorable appraisal, even if the market slipped.
The bottom line is, do your homework. The internet is a source of information that will help you sharpen up your buyer knowledge. Don't be suckered into a home you're not absolutely crazy about. Get home inspections, weigh the pros and cons. Be realistic with regards to how much you can actually afford. Factor in associated energy costs, home owner association fees etc. when coming up with a figure for what you can afford. Think long term. Think long term. Modest mid range home available in a great neighborhood, with room to expand and improve=greater value.