According to Census stats, from 2008 to 2012 the homeownership rate in the United States was 65.5 percent. Buying a house is a big decision, so if you’re thinking of taking this leap, you’ll want to make sure you consider a few things to help you find the perfect house in the perfect neighborhood.
Fast Facts about U.S. Housing
|Most Expensive Market||Malibu, CA (Median Home Value: $1 million)|
|Least Expensive Market||Detroit, MI (Median Home Value: $71,100)|
|Average Median Home Value in the United States||$186,200|
|Average Median Home Construction Year in the United States||1975|
Step One: Consider Your Finances
First, how long do you plan on staying in the area? If you don’t see yourself staying in an area for more than a year, then buying a house is probably not for you. However, if you plan on staying in the area, then buying a house rather than renting may be financially more conducive for you, as monthly mortgage payments go toward ownership rather than a landlord.
Related to mortgage payments, make sure your credit history is ready to go before you even start searching for a house. Since you will most likely need a mortgage to make a home purchase, you’re going to want to make sure your credit report is clean and correct. Aim for a high FICO score—the most widely used credit score model in the United States. The higher the FICO score you receive, the better interest rate you’ll be assigned (the FICO scale is 300 to 850). Even a tenth of a percentage can mean the difference between tens of thousands of dollars, so make sure you qualify for the best FICO score possible.
Step Two: Get Pre-Approved
Before you contact a real estate agent, apply to several lenders so you can get an idea of what you can afford. You’ll also want to make sure you get pre-approved rather than pre-qualified. Pre-approved means that the lender is inclined to give you a loan, whereas pre-qualified means the lender is estimating what you could borrow, not necessarily that you’ll receive the loan. The standard deposit for a home loan is generally 20 percent of the purchase price, but if you can’t afford that, there are low-interest mortgages that require smaller deposits.
After you’re pre-approved, you can start looking for a home within your price range. Typically, you figure out what you can afford by taking your salary and multiplying it by 2.5, as the general rule of thumb is your house should be two-and-one-half times your yearly income.
Step Three: Focus Your Search
You can use Niche Local to browse neighborhoods within your price range. For example, here are a few neighborhoods within Pittsburgh.
You can click on individual neighborhoods to read profiles of them, with school districts serving the area, plus schools and colleges nearby. Here’s a look at the Squirrel Hill North neighborhood of Pittsburgh.
Even if you don’t have school-age children, buying a house in an area with a good school district is helpful if you plan to sell the house in the future. Good school districts are a value-booster since they are often a key factor for home buyers. So by clicking on individual school districts and schools, you can browse Niche Grades to see how they stack up. For example, Allderdice High School near the Squirrel Hill North neighborhood gets a B-.
You can also use Niche Local to get area profiles in terms of housing trends.
This can help inform your decision about where to look in relation to what you can afford.
But what about where you’ll fit in? A single 30-year-old may be looking for something different than what a 40-something married couple with two teenage kids would be looking for.
By browsing Niche Local neighborhood demographics, you can see what kind of age groups you’ll be surrounded by. For example, Squirrel Hill North is abundant with 18-to-24-year-olds, so it looks to have a lot of college-aged people.
Since Squirrel Hill is near University of Pittsburgh and Carnegie Mellon University, this would make sense. But home buyers need to take this into consideration. Will there be a lot of noise from college parties on the weekends?
Step Four: Contact a Realtor
Once you decide on an affordable neighborhood that suits what you or your family is looking for, you can start browsing real estate websites like Zillow and Trulia or just contact real local estate agents directly. Realtors can help find you places within your range and may sometimes even know about upcoming listings that will soon be available.
Just like you would for an apartment search, take plenty of photos when you visit different houses, making note of what you like and don’t like. Visit open houses and chat with neighbors in the area if you can. Once you’ve found a house you really like, drive by it a few times at different points during the day to see what it’s like at these intervals. A house at lunchtime might be different from a house at 8 p.m. If applicable, you may also want to drive from work to a house to judge what traffic is like.
The Bottom Line
Finding a home can be a bit of a process, but figuring out what you want, what you can afford, and where you’ll fit in will make the operation easier and ultimately help you make the best decision for your future.