Buying a house requires serious thought and planning. It is a major investment and it could significantly stretch your finance and affect your lifestyle. That is why striking the right deal is critical. Here are some important aspects you must consider before you come to your decision.
Make a Commitment
Firstly, make sure you are likely to live in the same area for at least a period of 5 years if you intend to buy a house there. Buying and selling are costly affairs and the housing market is volatile, with prices changing frequently. As with any investment, it is wise to consider a decent lock-in period so that you can get optimum returns. By buying and selling a house too often, you would end up paying a huge amount as transaction costs, including brokerage, mortgage closing, processing a new mortgage etc.
Maintain Good Credit History
A good credit record will help you get attractive deals on mortgages and keep you in a strong bargaining position when you are negotiating your loan terms and even the house price. When shopping for the best mortgage, look for lenders who are willing to offer lower down payments. If your past record is good, you may even get a loan with a down payment of just 3% of the purchase price. Pre-approval is another good way to strengthen your bargaining position and make the process of buying the house faster.
Avoid a Deal that Puts Your Finances in Severe Stress
Look at houses that have affordable price tags. There are many online calculators that can help you assess the ideal investment amount for you based on your income and current liabilities. Get a professional to tell you whether the house you like is worth the price quoted by the seller. He can also help you make the right bid.
Understand the Trend
Review the recent sales in the area and understand the prevailing trend and pricing before you make your bid. A look at the previous three month period sales in that location should usually give you a good idea of what a competitive offer would be for a particular property. Start with about 5% lower than the recent sale prices for comparable properties.
With some planning and research on recent sales, and understanding your financial situation, you can find the right house at the best possible price.