You’re ready to buy a house, but before you make an offer, you need to ask some key questions. Having the right information can help you feel confident that you’re buying the right house at the right time, and at the right price.
Here are seven questions to ask before you make an offer.
1. What’s my total budget?
You may think you know the right price range to match your income and assets, but there may be other costs you hadn’t considered.
“What we have found from our profiles of buyers and sellers is that when potential buyers start to look at homes … they don’t necessarily know how much they can afford,” says Jessica Lautz, managing director of survey research and communications for the National Association of Realtors.
Consider other payments that may come up beyond the sales price of the home. Renovations, repairs and other changes may have to be factored into the cost. Use Bankrate’s calculator to estimate your monthly mortgage payment, then see how other costs will factor into your budget.
“Do you need appliances, blinds or flooring? Make sure that those items are still within your budget so that you are not walking into more debt than you are ready for,” says Carrie Niess, a copywriter for American Financing, a Colorado-based mortgage business.
2. Is my financial house in order?
Even if you think you’ve found the right house at a price you can afford, you’ll still need to show that you can close.
“Before you make a purchase offer on a home, it’s important to get preapproved for a mortgage. Not only will a preapproval tell you how much home you can afford, it shows a seller that you have the means to buy their property and can close the sale quickly,” says Laura Adams, senior insurance analyst and spokeswoman for insuranceQuotes.com.
Check your credit score for free to make sure a lender will give you preapproval. Even if you show enough income, a blemished credit history may disqualify you for the lowest mortgage rates.
3. What kind of mortgage should I get?
Don’t know whether a 15-year or a 30-year loan is right for you? What about a fixed-rate or variable-rate mortgage? There is no one-size-fits-all home loan, and the various terms and differences among mortgages can be overwhelming.
Choosing a knowledgeable loan officer is very important, says Henry Brandt, branch manager for Irving, Texas-based Planet Home Lending.
“It’s really critical for a borrower to find a good loan officer that knows all the products available so they can help you meet your wants and show you how to get there,” he says.
4. What are all the costs due at closing?
“There’s more than just the down payment. You also have to have the funds for the closing costs,” Brandt says.
These costs may include attorney fees, real estate agent commissions, home inspection bills and title insurance, all of which are typically due at the time of signing.
Buyers may need to be prepared to hand over more money at closing beyond these one-time fees, depending on how they’re financing the purchase.
For example, a first-time homebuyer typically pays 5 percent of the total cost of the loan as a down payment, according to the National Association of Realtors. But anyone who puts down less than 20 percent is almost always required by their mortgage lender to buy mortgage insurance, which requires additional funds to be put into an escrow account at closing.
5. What’s the history of the house?
What if the home you wanted to buy looked perfect but had a history of termite infestations? As a buyer you should know if there was any previous damage to the house before you make your offer.
“Always request a copy of the C.L.U.E. (Comprehensive Loss Underwriting Exchange) report from the seller. This little-known database maintains all insurance claims for homes and vehicles. It allows you to see what claims were filed on the property for up to the previous seven years,” Adams says.
6. How much should I offer?
Making an offer on a house can be a cat-and-mouse game. Offer too little and you risk losing the home to someone else. But offer too much and you could end up overpaying.
Your buyer’s agent should tell you how much comparable homes in the area have recently sold for, as well as high and low price ranges for a particular property so you can try to price your offer right the first time.
Find out how much time the seller will need to respond to your offer so you can be prepared, if necessary, to make a counteroffer that fits your budget.
“Know that you may have to make multiple offers, but a professional can help guide you through,” Lautz says.
7. How can I make my offer stand out?
“If you want your offer to win, it can be a good strategy to put a compelling story together and send a personal note,” says Dave Mele, president of Homes.com.
Mele advises getting to know the sellers and sharing with them your vision of how you’ll enjoy the home. He says this can make the difference between your offer being accepted and some other buyer’s offer winning out.
“It allows you to connect with them emotionally and that can actually trump the finances in the right situation,” he says.