Deciding which house to buy

For generations, buying a home was almost a guaranteed way to make money. While real estate has traditionally been considered a safe long-term investment, recessions and other disasters can test that theory—and make would-be homeowners think twice. During the Great Recession many homeowners lost money when the real estate market crashed back in , and ended up owning homes that were worth far less than the price at which they were purchased for many years after.

If you are buying the property on the belief that it will rise in value over time, be sure to factor the cost of interest payments on your mortgage, upgrades to the property, and ongoing or routine maintenance into your calculations. Along those same lines, there are years when real estate prices are depressed and years when they are abnormally high. If prices are so low that it is obvious you are getting a good deal, you can take that as a sign that it might be a good time to make your purchase.

It's too soon to tell what will happen to home prices in But if history repeats itself, we can expect a drop in home prices as a result of the COVID pandemic and its dramatic impact on the economy. Interest rates , which play a large role in determining the size of a monthly mortgage payment, also have years when they are high and years when they are low.

Obviously, lower is better. So if interest rates are falling, it may be wise to wait before you buy. If they are rising, it makes sense to make your purchase sooner rather than later. The seasons of the year can also factor into the decision-making process. If you want the widest possible variety of homes to choose from, spring is probably the best time to shop.

Part of the reason relates to the target audience of most homes: families who are waiting to move until their kids finish the current school year but want to get settled before the new year starts in the fall. If you want sellers who may be seeing less traffic—which could make them more flexible on price—winter may be better for house hunting especially in cold climates , or the height of summer for tropical states the off-season for your area, in other words.

Inventories are likely to be smaller, so choices may be limited, but it is also unlikely that sellers will be seeing multiple offers during this time of year. Some savvy buyers also like to make offers around holidays, such as Christmas or Easter, hoping that the unusual timing, lack of competition, and overall spirit of the season will get a quick deal done at a good price. While money is obviously an important consideration, there are a host of other factors that could play a role in your timing.

Is your need for extra space imminent—a new baby on the way, an elderly relative who can't live alone? Does the move involve your kids changing schools? If you'll be selling a house in which you've lived for less than two years, would you incur capital gains tax —and if so, is it worth waiting to avoid the bite? You may love to cook with gourmet ingredients, take a weekend getaway every month, patronize the performing arts, or work out with a personal trainer.

Before you practice making mortgage payments, give yourself a little financial elbowroom by subtracting the cost of your most expensive hobby or activity from the payment you calculated. If the balance isn't enough to buy the home of your dreams, you may have to cut back on your fun and games—or start thinking of a less expensive house as your dream home. If you are selling a home and plan to buy another, save the proceeds from your current home in a savings account and determine whether or not—after factoring in other necessary expenses like car payments or health insurance—you will be able to afford the mortgage.

It is also important to remember that additional funds will have to be allocated for maintenance and utilities. These costs will undoubtedly be higher for larger homes.

When you calculate, use your current income, and don't assume you'll be making more money down the road. Raises don't always happen, and careers change. If you base the amount of home you buy on future income, you might as well set up a romantic dinner with your credit cards as you'll end up in a long-lasting relationship with them.

However, if you can handle these extra house costs without extra credit card debt, you can afford to buy a home—as long as you have saved up enough money for your down payment. Affordability should be the number one thing you look for in a home, but it's also best to know how long you are going to want to live there.

If not, you could get stuck in a home you can't afford in a city or town you're ready to leave. Many financial experts suggest living in a home for five years before selling it as a guideline. Ahead, learn what to look for when buying a house: renovation potential, size and storage, and neighborhood.

Determine if the house you like needs work. Figure out whether the renovations are worth the time and expense. Is your family really going to be okay with closing it off and eating takeout for a couple of months? Those little things add up. Is there a wall big enough for your large-screen, wall-mounted TV? If the previous owner used the fireplace decoratively, it could be because it needs a new flue or has other problems.

These little things that buyers tend to skip are the ones that will irk you on a daily basis. Most homebuyers look at what they can see.

But you may decide to have another child or discover you need one of those bedrooms for a home office for a remote job in the future.

If you look at places that are outside your price range, you'll end up lusting after something you can't afford. That can put you in the dangerous position of trying to stretch beyond your means financially or cause you to feel unsatisfied with what you actually can buy.

Start your search at the low end of your price range. If what you find there satisfies you, there's no need to go higher. You may be better off putting that money toward something else. As we all should have learned from the subprime mortgage crisis, what the bank says you can afford, versus what you know you can afford or are comfortable with paying , are not necessarily the same.

Conversely, what you think you can afford and what the bank is willing to lend you may not match up, especially if you have poor credit or unstable income. Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. Make sure to be pre-approved for a loan before placing an offer on a home—or even before you go house-hunting in earnest.

If you don't, you'll be wasting the seller's time, the seller's agent's time, and your agent's time if you sign a contract and then discover later that the bank won't lend you what you need—or that it's only willing to give you terms you find unacceptable. The pre-approval process can also help you locate the aforementioned financial neighborhood for your house-hunting expeditions.

Be aware that even if you have been pre-approved for a mortgage, your loan can fall through at the last minute if you do something to alter your credit score , such as finance a car purchase. If your actions cause the deal to die, you may have to forfeit any deposit or earnest money you put up when you entered into the contract.

While you should be realistic in your search, and willing to compromise to some degree, don't cave on important things. For example, don't get a two-bedroom home when you know you're planning to have kids and will want three bedrooms. By the same token, don't buy a condo just because it's cheaper than a house if one of the main reasons you're over apartment life is that you hate sharing walls with neighbors.

It's true that you'll probably have to make some compromises to be able to afford your first home, but don't make a compromise that will be a major strain. Unless you are a high-end buyer looking at custom homes, chances are that for any home you find that you like, there are quite a few others that are close to it. Most neighborhoods have multiple homes that are similar or the same model; they may have all been constructed by the same builder.

Even if you can't find an identical model for sale, you can probably find a house with many of the same features. If you're considering a condo or townhouse, the odds are also in your favor. Being open to continuing your search will save you from making rash decisions you might regret later.

There are plenty of real estate websites and apps that can help you streamline the house-hunting process, making it possible to preview hundreds of homes within a few hours from the comfort of your couch. Once you're seriously shopping for a home, don't walk into an open house without having a real estate agent or broker. Agents are held to the ethical rule that they must act in both the seller's and the buyer's best interests.

But you can see how it might not put you in the best bargaining position if you start dealing with a seller's agent before contacting one of your own. Sometimes a homebuyer can feel like Goldilocks in the three bears' house: This is too big, this is too small.

Distinguishing between what's fixable and what's not is a key part of house-hunting. Even if you can't afford to replace that hideous wallpaper in the bathroom right now, it might be worth it to live with the ugliness for a while in exchange for getting into a house you can afford.

If the home otherwise meets your needs in terms of the big things that are difficult to change, such as location and size, don't let physical imperfections turn you away.

At the same time, don't be snowed by minor upgrades and cosmetic fixes. These are inexpensive tricks that sellers use to play on your emotions and elicit a much higher price tag. Besides, doing home upgrades yourself, even when you have to hire a contractor, is often cheaper than paying the increased home value to a seller who has already done the work for you.

And you can do them according to your taste, not someone else's. Look for homes whose full potential has yet to be realized, especially if you're on a strict budget. The bump in equity from your upgrades will help you to move up the property ladder.

That being said, if you're going to buy a house that needs work, don't buy a fixer-upper that's more than you can handle in terms of time, money, or your own ability. For example, if you think you can do the work yourself then realize you can't once you get started, any repairs or upgrades you were planning to make will probably cost twice as much once you factor in the labor—and that may not be in your budget.

You may be able to negotiate a lower price if you know that the home needs major repairs. Consider an independent home inspection, separate from the one the homeowners had done. In many cases, the results of a home inspection can be grounds for pulling out of a deal without losing your earnest money.

Once you have bid on your home, and the offer is accepted, you will go into escrow. The escrow holder will work to make sure that all the documents, money, and other necessary information are properly prepared before you close.

Escrow is set up to protect the buyer, the seller, and the lender. It can take time to complete escrow, depending on a number of factors. It's not uncommon for a closing date to be three to five weeks in the future. When the closing date arrives, you show up and sign the final papers. The escrow agent will release the funds to all appropriate parties. Once you have closed on your home, it is time to move in. You can paint, unpack, and enjoy your new home. Be sure that you change your address with your bank, and other accounts.

You can set up your utilities and cancel your old ones as well. That will save you time and money, because you will avoid late fees. Some companies will waive installation fees if you transfer your old account to your new address.

Updated by Rachel Morgan Cautero. You should ask your realtor questions about the technical and business aspects of homebuying. A realtor will have great insight into your negotiating options and what kinds of concessions or contingencies are appropriate for your situation. You can ask about the sales history, comparable sales in the area, and who to hire for the home inspection. Consider asking your realtor whether they would buy the home to learn what they see as the pros and cons of the home.

Some important purchases that are sometimes overlooked by first-time homebuyers include cleaning supplies. For example, what types of floors does the home have, and do you have the proper tools to clean them? If you're moving into a house from an apartment, you may also need to stock up on yard supplies like a lawnmower. There are many assistance programs on the state and local levels, so your state's housing finance agency will have the best information available for you.

On the national level, the Public Housing Agency offers housing vouchers for low-income Americans who want to buy a home. The Federal Housing Administration also has a program of insuring mortgages, making it easier to find an affordable loan for a home. Consumer Financial Protection Bureau.

Board of Governors of the Federal Reserve System. Accessed April 13, Federal Deposit Insurance Corporation. Ohio Department of Commerce.