Thank us later.
BY CANDACE BRAUN DAVISON@ House Beautiful
PUBLISHED: AUG 7, 2024
Buying a house seems straightforward enough. You look at listings, tour some houses, get a mortgage for something within your price range, sign on the dotted line, and, you know, make payments for 15 to 30 years...or what feels like eternity. But, as you get closer to yanking that “For Sale” sign out of the front yard and brandishing it above your head like the victor you are, there are always a few unexpected hiccups—and terms that sound like straight-up jargon. Fear not. Here are some of the big ones to look out for as you embark on this journey. (Godspeed, friend.)
1. Don’t Blindly Trust the Estimated Mortgage Payments Online
It can be easy to take experts’ recommendations to spend 30 percent of your income on housing, divide that by 12, and think, That’s it! That’s the monthly payment I can afford!
Depending on your credit score, the current state of the economy, and a host of other factors, that final monthly payment can vary widely, so be prepared: What seems like it’s within your budget may not be in reality.
To get a better sense of what your monthly payments will look like, try a mortgage calculator that lets you set the down payment, loan terms, and factors in things like property taxes and Homeowner’s Association fees (if the house you want to buy is subject to one), like this one from MortgageCalculator.org.
Once you have a figure you feel comfortable with and apply for a loan, you’ll get a sense of what the bank feels comfortable actually lending you. Just be aware that you may get preapproved for more money than you budgeted for—that still doesn’t mean you can (or should) go nuts and spend every penny of it.
2. You Need to Save Up for More Than a Down Payment
By now you’ve probably heard that most experts recommend saving 20 percent of the cost of the home you want to buy for a down payment. And that most lenders will require at least 3 percent minimum, unless you qualify for a zero-down-payment loan through VA. But, even if you’ve used a mortgage calculator to figure out what you can afford and have dutifully set that down payment aside, know that you’ll need more money to lock down your dream home.
Not just for movers. Or homeowner’s insurance. Or the inspection, and closing costs, which typically set you back another couple thousand. You can get a rough idea of what to expect—factoring in where you plan on buying, the cost of the home, and more—using this Closing Cost Calculator.
3. Your Monthly Payment Includes More Than Just Your Mortgage
Say whaaaat?! That check you’ll be sending to your lender often includes your property taxes too. After all, until you pay off your debts, the mortgage company technically owns your house, and they don’t want to jeopardize their investment because you forgot to pay the taxman. So they take care of it by putting your monthly tax payments and your insurance payments into an escrow account. When your taxes are due to the county, the lender takes the money out of escrow and pays it.
Oh, and if your down payment is less than 20 percent, expect to have your mortgage cost a little more, because you’ll have to pay for private mortgage insurance (PMI). Some lenders offer different ways to pay this—and no, tacos are not one of them—though it’s often a monthly cost that’s added to your mortgage payment. The good news: Once you’ve paid 20 percent of the home’s cost, that PMI expense goes away.
4. If the Inspection Isn't Terrifying, Be Concerned
Once you've found The House and the seller has accepted your offer, you need to hire an inspector to nitpick it, detailing every single thing that’s wrong with the space. This is terrifying, because afterward, they’ll talk you through what issues they found and hand you a packet of papers outlining every little problem.
Don’t panic: It’s the inspector’s job to tell you the gutters point the wrong way, or the deck needs to be replaced, or it looks like the washing machine is two loads away from going kaput. The more thorough the findings, the better. This lets you assess whether the house really is worth the asking price—and negotiate with the sellers to bring down the sale price or ask for some things to be fixed (or you get a credit to do the fixes yourself) before you sign on the dotted line.
5. You Can Ask for the Art on the Walls
When you’re buying a house, you can negotiate to buy any appliances or furniture you love that are in it. They don’t have to agree, but they may want to—especially if the item in question is bulky or difficult to move. On the flip side, the homeowner can request to take certain things with them—like the fig tree you fell for when you first visited the space (which actually happened to me). That doesn’t mean you have to say yes, either. But it does mean you can negotiate with them, if that tree—or tufted sofa, or vaguely otherworldly chandelier—really matters to either of you.
6. Closing Time Lasts Longer Than That Semisonic Song
Closing time—also known as the period when you get your financing in order, have the inspection, and confirm the selling price with the homeowner—can often take up to 50 days. Usually, the seller wants to unload their house quickly, so they can move into their new digs. Offering a quick closing period (assuming you can get it all done in time) can push the seller to accept your offer, even if it’s a little lower than other bids or the asking price.
On the flip side, if the homeowner hasn’t found their next place, they may push for more time. That’s just one of many things you may not realize you can negotiate, but you totally can—and should. (In my case, the homeowner agreed to pay us $200 a night for a week rather than live out of a hotel when our agreed-upon closing time ended and they weren’t ready to move.)
So, there you have it. It’s an intense process, and it sucks at times, but when you can finally paint the walls or watch Nailed It! on a decibel above a distant whisper, it’s worth it.