What to Look for When Buying a House

Summary: What should you look for when buying a house for the first time? What do you need to know about mortgage shopping, house hunting and other parts of the buying process? These are common questions among first-time buyers, and you'll find answers in this articles.

Because of recent actions by the Federal Reserve, mortgage rates are enticingly low right now. Earlier today, in fact, we blogged about the rates for a 30-year fixed mortgage dipping below the 5% mark. As of right now, most of the people taking advantage of this have been homeowners looking to refinance.

But there are also many first-time home buyers coming out of the woodwork to capitalize on these low rates. Being new to the process, many of them want to know what to look for when buying a house.

There are many checklists online that point out the different things you should look for when visiting a home. But most of these lists only address part of the picture -- the physical structure itself. In truth, the process of buying a house starts long before you visit your first property. So I'd like to take a broader look at that process. Here's my top-ten list of things to look for along the way, starting at square one:



Financial Prep Work

Before you start looking at homes for sale, you need to take a good hard look at your own financial situation. A lender is going to do the same thing, you might as well do it first. Here are some things to look for and consider during this process.

• How is your credit score? In order to get qualified for a mortgage loan in this economy, you'll probably need a score of 670 or higher. To get the best rates a lender has to offer, your FICO score will have to be even higher, probably in the 760+ range. Learn more about the credit score needed to buy a house.
  
• How much debt do you have right now? This is another area lenders will look at when you are buying a house and shopping for mortgages. In particular, they will look at your debt-to-income ratio to see how much new debt you can realistically handle. Learn more about the DTI ratio for mortgage qualification.
• Do you have money saved up? Most lenders these days will require you to make a down payment on the home, probably in the 20% range. You'll also need money to cover the various closing costs associated with the home buying process. Learn more about how to prepare for closing costs.
  
• Do you have a home buying budget yet? If not, you need to do some financial homework to find out what you can afford to pay each month toward your mortgage.
  

Type of Mortgage Loan

When most people talk about what to look for when buying a house, they gloss over the subject of mortgage loans (or ignore it completely). This is a disservice to the reader, because it's an important topic that must be considered when you are buying your first house.

• First of all, you'll want to research the key differences (pros and cons) between the adjustable-rate mortgage (ARM) and the fixed-rate mortgage loan. Many buyers get themselves into trouble when using ARM loans, simply because they don't fully understand them. Learn more about the different types of home loans.
  
• When you start applying for a mortgage loan, it's usually best to compare offers from a handful of different lenders. That way, you can see who is willing to offer you the best rate based on your qualifying criteria. The Internet makes this easy to do (see next item).
  
• I always recommend that people start with online quotes from mortgage lenders, because it's quick and easy. It also lets you compare multiple offers, which we just talked about.
  

Looking for a House

Now you can see what I meant when I began this tutorial. There are a lot of considerations to make before you even reach the house hunting part of the process. So let's assume that your finances are well in hand, and that you understand the different types of mortgage loans. Here's what to look for when shopping for a house in your area.

• Don't underestimate the importance of the neighborhood and schools in the area where you're shopping. In addition to being quality-of-life items, these things affect property values. You should also research the property taxes in the area where you want to live. Sometimes on part of town will have a higher tax rate than another area of town.
  
• Don't be blinded by first impression the house makes on you. You need to maintain an objective eye when you go inside the house. Otherwise, you're likely to overlook some of the important details.
  
• Take a checklist with you and make notes when touring each house. This will force you to evaluate certain aspects of the property that are important to you.
  
• Bring a digital camera to get pictures. This helps you recall details later on, especially when you're looking at a lot of houses in a short span of time.
  
• How is the commute? If you'll be driving to and from work each day during rush hour, then you should visit the home during rush hour to judge the traffic. This is something a lot of first-time buyers forget to look for when buying a house -- only to regret it later on.
  

These are by no means the only things to look for when buying your first house, but they are some of the more important considerations. If you'd like a more comprehensive review of this process and the steps involved, check out the article below.

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Read all 101 steps to buying a home
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