What You Buy When You’re Buying Your First House
Wednesday, September 5, 2018, 6:00 AM | Leave Comment
Your first house is both your most important and your least important real estate purchase.
On one hand, you aren’t likely to stay in your first house long. Studies show that most American families pack up and move out after about six years in one spot.
On the other hand, when you’ve never invested in real estate before, buying a home feels monumental — and those feelings are often bolstered by the mountains of paperwork you encounter throughout the process.
However, for most first-time home buyers, the most telling sign of the importance of their purchase is learning about all the stuff they have to invest in on top of the property. We don’t mean couches, kitchen tables and guest room furniture; rather, we mean inspections, insurance, warranties and the like.
Here’s a rundown of what you will pay for during the home buying process and why it matters for the security of your future home.
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Home Inspections
The first step to preventing your home from falling into disrepair is ascertaining that it isn’t already on the verge of collapse.
When you are in the process of buying a home — after you make an offer but before you close — there will be a week or two reserved for home inspections. During this period, you will tour your prospective home with a number of professionals, who will identify the soundness of the home — and of your potential investment.
Standard home inspections are usually priced by the size of the home, so for your first property — which likely isn’t an enormous mansion — you should expect to pay about $300. For this amount, an inspector will survey your property, identifying potential hazards, like an old, leaky roof or outlets that aren’t up to code. They might also point you toward more specialized inspections, perhaps of the plumbing or electrical system.
For peace of mind and a thorough understanding of what work your home needs, you should pay attention to your inspectors and pay for additional inspections as recommended.
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Homeowners Insurance
It is nearly impossible to buy a house without first acquiring a home insurance policy. Mortgage lenders require you to have insurance on the home before they will approve your loan; it is a way for them to guarantee protection of their investment and yours.
When you find a policy that suits your needs you give your lender the details, and your home insurance is rolled into your mortgage payment.
Though the insurance is only paid once per year, like your property taxes, charging you smaller sums every month — including the first month you own the home — is a way to ensure the insurance costs are paid and protection against accidents is in place.
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Home Warranties
You should avoid falling into the trap of believing that a home warranty provides the same security as home insurance.
Though home warranties are not required by lenders, they are exceedingly valuable tools for safeguarding your investment. Instead of protecting you from the high costs of accidental home damage, as insurance does, a home warranty helps you pay for expected damage to your home, such as that accumulated through regular wear and tear.
In the current real estate market, it is common for sellers (or their real estate agents) to offer a home purchase warranty with the sale of the house to show good faith in the property’s quality. However, if your chosen house does not come with a warranty, you can and should invest in your own plan.
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Home Appraisal
You don’t want to make a bad investment, and neither does your lender. Thus, after the inspection period ends but before you close, your lender will schedule a home appraisal.
Much like a home inspector, an appraiser wanders around your prospective property, evaluating the condition of different aspects of the home as well as its overall value. With this information, your lender can determine whether you are paying too much for the property — and if you are, you will have to put down the difference.
Unlike with inspections, you do not have any control over who your appraiser is; you don’t even get to be on the property when they make their rounds.
However, if the appraiser identifies a serious flaw in the property, such as a feature that is dangerously against regulation, you or the seller might need to address the issue before the purchase can close.
You should prepare for these unexpected costs with extra cash in the account you will use for your home purchase.
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