5 Crucial Questions To Ask Before Buying a House
No matter how many episodes of “House Hunters” or “Love It or List It” you’ve watched, buying a home inevitably comes with surprises. Before you start house hunting, you should ask yourself these 5 questions.
1. Have I checked my credit report?
When you apply for a mortgage to buy a home, lenders want some reassurance that you’ll repay them later. One way they assess this is to check your creditworthiness. Credit scores can range from 300 to 850; in general, what’s considered an excellent credit score is in the range of 750 to 850. A good credit score is from 700 to 749; a fair credit score, 650 to 699. A credit score lower than 650 is deemed poor, meaning that your credit history has had some rough patches.
The three nationwide consumer credit-reporting companies—Equifax, Experian, and TransUnion—are each required to provide you with a free copy of your credit report annually if you request it. You can order all three at once, or stagger them throughout the year, from one central source: AnnualCreditReport.com.
You should closely examine each report before you meet with a mortgage lender. Why? Because even if you’re fairly sure you’ve never made a late payment, 1 in 4 Americans find errors on their credit file, according to a 2013 Federal Trade Commission survey. If you discover errors, contact Equifax, Experian, or TransUnion with proof that the information was incorrect. From there, they will remove these flaws from your report, which will later be reflected in your FICO score.
2. Who’s the best real estate agent for me?
Finding the right real estate agent – like DiVito Dream Makers – to partner with can be a daunting task. A lot’s at stake, and there’s certainly no shortage of options.
3. If I get a new job, am I likely to have to relocate?
Your career plans play a pivotal role in determining whether it makes sense for you to buy a house. Changing jobs won’t be a big deal if your new gig is in your current city, but if there aren’t a ton of job opportunities in your industry in your area, you may find yourself having to relocate a year or two after you bought your home—in which case you may not be able to recoup the amount of money it cost you to purchase the house.
4. Can I afford to pay closing costs?
Getting a mortgage comes with a number of closing fees, which borrowers have to pay when they reach the settlement table. These are out-of-pocket expenses that you need to budget for.
Although buyers and sellers both typically pitch in to cover closing costs, buyers shoulder the lion’s share of the load (3% to 4% of the home’s price) compared with sellers. So, on a $250,000 home, your closing costs could come to about $7,500 to $10,000.
Typical closing fees include the following:
- Closing fee ($300 to $600): You pay for a representative from the title company to supervise the transfer of title at the time of closing.
- Lender’s title insurance (usually 0.5% of the purchase price): This protects your lender if something was missed in the title search. The cost depends on the size of the policy and is set by the state.
- Title search ($300 to $600): Your lender will do a search to ensure there are no liens on the property or anything that could prevent you from purchasing it.
- Wire or courier fees ($30 to $100): If documents need to be sent overnight or money needs to be wired, you’ll pay these fees at closing.
- Document recording fees for the deed and mortgage ($125 on average): Every time a home is sold, the government must record the change of ownership; this fee is typically paid by the home buyer.
Under federal law, borrowers must receive what’s called a “loan estimate” form (previously called a “good-faith estimate”) that outlines their approximate closing costs from their mortgage lender. When you obtain this information, you’ll be able to gauge whether you can pay for closing costs and truly afford to purchase a home.
5. Am I dead set on finding my ‘dream home’?
People throw around the words “dream home” a lot. However, the honest truth is there’s no such thing as a perfect house. If your list of “must-haves” is immensely long but you’re not willing to budge on anything, shopping for a house may wind up being a waste of your time. It’s important to identify your housing criteria to get a better picture of what it is you’re looking for—and whether that kind of home exists.
Article originally appeared on Realtor.com.