The Top 10 Things You Need to Know Before You Buy Property
Buying property can be one of the biggest investments you make in your life, so before you go and buy any old place, make sure to take these 10 things into consideration. Only then will you know that you’re getting the best possible deal on your new home and you’ll be able to enjoy it well into the future.
1) Why are you buying?
Not everyone has a crystal-clear reason for buying property, but before you make an offer on a place, it’s worth taking some time to figure out why you’re making such a big purchase. Are you trying to achieve financial freedom? Do you want your own work space? Do you want an investment property? Is it an inheritance or just one of those things that comes with getting married? Are your parents paying for it and if so, are they taking care of all costs or will there be additional costs down the line (like taxes)? It’s good to know all these things ahead of time so that when you do find the perfect house, there aren’t any surprises later.
2) What kind of space do you need?
Sometimes, you may need a small space; other times, you may need something bigger. For example, if you’re moving from an apartment into a home with a yard for your kids and dog, you’ll probably want more room for your family. If that’s what you need, be sure to find it. While some experts have different recommendations on square footage per person, most agree that many Americans are house poor—meaning they spend too much of their income on housing—and live in homes that are larger than they actually need. If you plan on renting out part of your home (or all of it), make sure that extra space is needed as well.
3) What is your budget?
The first thing you need to do before purchasing property is determine how much you can afford. If you’re financing your purchase, lenders will expect you to come up with a down payment of at least 20% of your home’s value. While that may seem like a high number, keep in mind that mortgage rates are still very low—meaning now could be an excellent time to buy. (By way of comparison, a typical down payment on a house in 2014 was around 11%, according to data from Zillow.) Financing is also available for borrowers with less than 20% down. These options include mortgage insurance and piggyback loans, but they typically have higher interest rates and other associated costs.
4) Location, location, location!
The location of your property is a huge factor in its value. Think about schools, hospitals, amenities (shops and restaurants), access to public transport and so on. Are there any planned developments that could increase your property’s value? What about plans for a nearby highway or train line? At what time of day are you most likely to use your property? If it’s for business purposes, will there be heavy traffic at certain times of day? Will you need parking spaces as well as indoor parking? Is outdoor parking an option instead? These things should all be considered before you buy property.
5) Don’t jump into anything
It can be tempting to purchase property without having all of your facts straight, but it’s important that you don’t make any hasty decisions. It’s easy to get caught up in a property and feel like you have to make an offer right away, but you need time to really evaluate your options. Conduct research before buying a property so that you can be sure you aren’t about to make a mistake. Be sure to look at property values, how long properties are on market for, how well the area is doing economically and what neighboring properties are selling for.
6) Don’t be overly eager to buy a property – Get your finances in order first
If you haven’t got your finances in order, then don’t be hasty in buying property. This is especially important if you need a mortgage to buy it. If you can’t prove that you have enough money for at least a year of all your expenses and mortgage payments, then get your finances in order first before you buy property. Otherwise, it will only result in heartache down the road when your mortgage lender forecloses on your property because they weren’t made aware of these issues beforehand. Now let us take a quick look at things that you should know before buying property
7) Start with getting pre-approved for financing
Buying a home is one of those things where you’ll have no excuse for going into debt. If you can’t afford it in cash, you can’t afford it. But since getting pre-approved for financing means a lender has checked your credit history and verified that you can make regular payments on your own (rather than relying on someone else’s income), it’s an important first step in making sure that buying property is right for you and your family. Don’t worry about having to decide between different financing options; once your loan officer has looked over all of your information, he or she will be able to tell you what kind of loan works best with your situation.
8) Work with a real estate agent you trust
Your real estate agent should be your partner, not just someone you hire to help you find a property. A good agent is worth his or her weight in gold—or at least in a hefty commission. With so much on the line, it’s important that you work with an agent who knows what he or she is doing and can add value at every step of the process. One of their most valuable roles during your search will be helping keep you focused on what matters most by keeping you out of emotional decision traps (see No. 2 below). Don’t just trust anyone; trust a local expert who knows property values and market conditions inside and out.
9) Do your homework! Research the market and visit properties. And then some more research…
Here’s some more advice: make sure you know exactly what kind of property you’re looking for, as there are lots of different types of property that are suited to different kinds of people. If you’d like a guide on how to research properties before they hit sale, take a look at our property research guide. Also check out our property buying checklist too, which has all the things you’ll need when viewing properties with a surveyor. As we mentioned earlier, it’s also important that you get your head around leasehold rights (what freeholders and leaseholders have rights over) and funding options (like right-to-buy). It’s always good to do as much research as possible before buying so that everything goes smoothly once it comes time for purchase.
10) Make sure it’s legal and properly zoned before you buy anything
You should make sure that it’s legally possible for you to buy what you’re interested in buying, and that it’s properly zoned. If you don’t do these things first, there’s a good chance your purchase will end up being fruitless and costly. For example, if you bought property in an area where commercial development is illegal, or if property is not zoned for construction, then your land would be virtually worthless because it could never be used for its intended purpose. Even worse, zoning laws can change with time and you may have spent a lot of money on something that isn’t even usable anymore. Make sure anything you want to buy has appropriate zoning laws before buying it!