“You can rent a house but you can only own a home…”
The Fundamentals of Buying and Selling Residential Real Estate
First Time Homebuyers | Why you want a Buyers Agent | Your Homebuyer Questions
After food and water, shelter is the next most important asset for survival. In the modern homes are more than a place to protect us against the elements. They are places we grow up, raise families, and make memories. Homes represent financial security and stability. They become a source of wealth.
Owning residential property, whether for personal use or with the intent to invest, comes with benefits and challenges.
What does it take to buy residential property?
Purchasing residential real estate is a more elaborate process than, say, buying a car. For one, it’s usually the most expense purchase people will make in their lifetime. That alone means due care is needed. Here are some basics in the process of buying residential real estate.
Understand your finances
Have you ever heard the term “house poor”? This is a slang term that means someone is spending a large portion of their income to maintain their home. You’ll hear hints of being “house poor” when owners make comments like they don’t have money for a family vacation because they’re putting it into their home. Overspending on a residential home is detrimental to your financial security and mental health.
Before buying residential property, understand how much home you can realistically afford. The rule of thumb is housing costs should not exceed 1/3 of your monthly income. Look at how much money you have available for a down payment and closing costs. You might want to buy a $400,000 home, but lack the $80,000 needed as 20% for a down payment to get your mortgage to an affordable payment.
Understanding the market
No two residential property markets are alike. San Francisco, Portland, Seattle, are completely different from Camas, Washington, which is different from Vancouver, Washington. Real Estate markets change over time. Sometimes we are in a buyer’s market, a scenario where a large inventory and low buyer interest allow negotiations to favor the buyer. In a seller’s market, high demand and low inventory drive up the medium price point. Or, we could be a balanced market, where the interest is nearly equal between the number of available properties and the buyers currently looking.
An interest in homeownership
Residential property ownership is not an asset like goal or minerals that buy and store for years. You are going to live in the home. The property will show natural wear and tear. Its features must be maintained to ensure the comfort and safety of the occupants. When the HVAC dies or the neighborhood kids break a window, you need to have the financial capabilities to fix these items. Anything could go wrong at any time: a roof leak, termites, water heater bursts – and as homeowner, it’s your responsibilities to oversee the repair. In short, residential properties require ongoing labor.
Research financial options
Most homeowners financial a portion of their residential property purchase. Different loan programs are available. Special financing options exist for low-income families, rural property, military veterans, first time homebuyers, and a slew of others. This is on top of more traditional mortgages programs, like fixed-rate and adjustment-rate mortgages. Beyond the interest rate, look at the different loan program requirements, such as percentage down, years of the loan, and prepayment penalties. Learn what programs you potentially quality for and best fix your needs.
Time and patience
A home transaction is much more complicated than buying furniture or purchasing a car. To find the right property requires a lot of research and time spend looking at properties. Some people do get lucky and find the right home within a matter of weeks. Other spend months looking for the right opportunity. Whatever your scenario, expect the home-buying process to take several months.