Buying a new home is an exciting part of life’s journey — unless you happen to buy a house that looks nice on the outside but soon turns sour when unexpected problems start popping up.
The right house should be determined by more than just a nice coat of paint and some neat landscaping. The bones of the house need to be solid as well to ensure your dream home doesn’t turn into a nightmare.
This guide will point out the most important information you need to know when buying a home.
Table of contents
- What to look for when buying a house
- Steps to take before buying a house
- Summary of Money’s What to look for when buying a home
What to look for when buying a house
You want a home that’s going to last and not eat up a huge chunk of money in the process. Some potential problems are easy to spot when shopping for a home, while others can be hidden away. Learning to identify red flags can keep you from blowing your budget or regretting your home purchase.
Major structural issues will cost a lot of money to fix. A thorough home inspection before you close on a property can help identify problem areas.
The foundation is literally what holds a house together. It prevents the home from shifting, provides insulation in cold climates and keeps insects and moisture from creeping into the home.
A cracked foundation, whether in an older home or a new one, can lead to a number of problems, including a build-up of Radon, a radioactive gas found in all soils that can cause lung cancer, in the home.
Some of the more obvious signs of a damaged foundation can include:
- Exterior/interior wall cracks (some small cracks may not be a sign of a bad foundation)
- Uneven or spongy floors
- Cracked floor tiles
- Gaps between walls and door or window frames
- Bowed walls
- Sinking ground or weeds around the foundation
- Moisture in the basement or signs of water damage
The roof is one of the most important parts of a home and can also be an expensive one to repair or replace. Damage to a roof may not be easily visible from the outside, either, so make a point to ask about its condition. You can have a roof inspection done if you suspect there are issues.
Some of the questions you should ask the sellers include:
- How old is the roof and what is it made of? Different roofing materials have different life spans. Once you know what it’s made of and how long the roof has been in place, you’ll have an idea of how much longer it may last.
- When was the last time the roof was inspected?
- Is there a roof certification letter? Contractors can often provide a letter certifying the condition of the roof upon inspection and how long they estimate it will last. Not every homeowner will have one but it’s still good to ask.
- Has there been any damage to the roof? When? What type of damage?
The biggest potential problem with basements is water damage that, in turn, can lead to a mold problem. Water leaks are usually caused by faults in the foundation, but they can also be caused by leaky pipes or improperly installed windows. If you’re not sure about the condition of the basement, get it inspected.
Look for the following signs of water damage:
- Stains on the walls, ceiling or floor
- Damp walls
- Pooling water
- Mold stains
- Damp smell
In addition to keeping the elements and pests out of your home, attics help regulate the home’s temperature. It’s important to go into the attic and look for any visible damage to the joists, roofline or insulation that can pose a danger to the structural integrity of the roof.
Some of the problem signs that could indicate damage to the attic include:
- Signs of pests living in the space, such as bat or rat droppings, sawdust (termites) or nests
- Wet insulation, which can indicate a water leak
- Mold stains or soggy, blackened wood
- Improper ventilation
- Leaky pipes from the A/C unit or plumbing running through the space
- Damp smell
The amount of damage that water leaks produce can’t be overestimated. Within 24 hours water can absorb into the drywall, damage electrical components and cause wood to start buckling, not to mention that mold will start to develop. The longer the leak goes unattended, the more damage it causes.
Aside from water leaks from structural damage, you should also be on the lookout for other types of leaks, like from sinks or toilets, within the house that could be a sign of major repairs ahead.
There are four major plumbing issues you should be on the lookout for.
- Old water heater: Most water heaters will have a useful life of about 10 years. Ask how old the heater is. Rust and water puddling around the base are other signs the unit may need replacing.
- Faucets and toilets: Open water taps and shower heads to test water pressure. Check for leaks around the fittings and shut off valves. Flush the toilets to see if they’re draining properly and check around the base for loose fittings.
- Sewage lines: Ask if the sewage line goes into a main line on the street or into a septic tank somewhere on the property. If it goes into a main line, the sewage pipes can be inspected by a plumber if you suspect a problem. Clogged or collapsed lines can cause the sewage to back up into the home. If the lines go into a septic tank, look for dampness, puddling water or bad smells around the tank.
- Drains: Turn on the faucets and watch how they drain. The water should go down quickly and not pile up in the sink or bathtub/shower. Slow drains can indicate a major clogging problem that can eventually lead to leaks or burst pipes.
Mold in a home can cause major health problems. Common symptoms can include sneezing, runny nose, blurry vision, persistent cough, difficulty breathing, fever and skin rash. More serious symptoms include bronchitis, chronic sinusitis and organ damage. Mold exposure can also trigger asthma attacks.
Dark and damp places are perfect breeding grounds for mold, so it’s important to know how to spot problem areas:
- Look for spots or water stains on the walls, ceilings and floor
- Lift area rugs to check the flooring underneath
- Check inside kitchen and bathroom cabinets
- Look for black spots in the grout in tiled areas
- Inspect the areas around window sills and exterior doors
- Check the basement, attic and garage for water stains or spotting
- Look at the areas around the A/C and heating vents
Heating, ventilation and cooling systems (HVAC)
It’s important to check that the heating and cooling systems are working properly. HVAC units can last between 10 and 25 years depending on the type of heating and cooling units used and how well maintained they’ve been.
Ask the seller how old the HVAC system is and when the last maintenance was done. If the system has needed major repairs, ask what type of repair and how long ago it was done.
Look for signs of rust, water pooling and cracks around the A/C compressor and the furnace. These are signs that they may need repairs or replacement, which can cost thousands of dollars. You can also listen for unusual sounds when the system is turned on.
The location of the home is important. After all, it’s the only thing you won’t be able to change, renovate or repair. It has to be an area that offers the kind of home you want within your budget. The best places to live in every region will have different characteristics that will make them unique.
Drive around the neighborhood during the day and night to get a feel for what living in the area might be like. Check for amenities that are important to you, like parks and play areas or easily accessible shopping. If you’re going into the workplace, how long is the commute and how’s the traffic? Other things to consider when buying a home include:
House size and style
When you tour homes you want to look for the ones that tick the most boxes on your must-have list. Focus your search on neighborhoods that have multiple homes with the features that are important to you. During tours, ask yourself: Does it have the right number of bedrooms and bathrooms? What is the square footage? Is the house style to your liking? Is there room to expand? All these questions are important when it comes to choosing the right home.
You want to make sure you don’t overextend yourself. When you go through house listings, concentrate on neighborhoods with homes that are within your budget or a little below. You won’t be tempted to spend more than you should on a more expensive home if you don’t see it to begin with.
Look at homes that have the features that are important to you, such as a large backyard, an attached garage or updated kitchen appliances. Pay attention to amenities that are more expensive to add later and don’t sweat the things that can be easily replaced once you move in.
Your family’s safety is an important consideration as well. There are several resources you can use, such as SpotCrime, to find out the crime rate in the areas you're considering. Look at neighborhood Facebook pages or other social media to get a feel for the community. You can also look for signs that the neighborhood is thriving: a lot of local businesses, busy parks and playgrounds and lots of community events are all signs of a relatively safe place to live.
If you have kids or are planning to have them in the near future, the quality of the schools in the area are going to be important. Look into both private and public schools, check parent reviews and school test scores. A visit to check out the facilities, curriculum and activities offered isn’t a bad idea either.
If you buy a home close to an airport or a busy highway, you’re going to expect a certain amount of noise. But other areas can be noisy too. Drive by the areas you’re house hunting in at different times and on the weekends to see how the neighborhood sounds. Then decide whether the potential for unwanted sounds is a dealbreaker.
Sources of noise can include:
- Highways or traffic-heavy streets
- Nearby sporting or recreational facilities
- Proximity to bars and music venues
- Loud neighbors (especially true in condos and townhomes)
- Nearby construction sites or industrial areas
In a perfect world, you would find your dream home in move-in ready condition. The reality is that you may have to compromise. When looking at prospective homes, take into account any work that may need to be done and whether you're ready to take those costs on. Or, if you’re planning on remodeling anyway, keep track of the areas you want to redo and get estimates for the work that needs to be done.
Homebuyers want to imagine what their life would be like in a prospective home. They often do this by ‘feeling’ the house and seeing how the rooms flow into each other and how the layout fits with their lifestyle.
Some layout flaws can be corrected by moving interior walls around, which can drive remodeling expenses up. And if the walls are load-bearing or foundational walls, the cost will be much higher. When choosing a home, make sure it fits all your needs without a major remodel or get an estimate of how much it will cost to make the changes (and then be honest with yourself about whether you have the necessary budget).
Examples of what homebuyers may consider a bad layout are:
- Narrow hallways
- The front door opens up to a staircase
- Living areas such as family rooms not connected to other parts of the house
- A kitchen located far away from the dining room
Repairs can be either minor and relatively quick to fix or major, requiring a sizable investment. Things like new light fixtures, new flooring or a fresh coat of paint won’t necessarily break the bank and can be done in your time frame.
Other repairs, like a new roof, HVAC unit or bringing old wiring up to code can be a major expense. The silver lining is that if you love the home and there are no other red flags, you can use the needed repairs as a negotiating point with the seller to get a concession, such as a reduction in price or having them pay for the work.
Unusual cosmetic enhancements
Sometimes a ‘cosmetic’ enhancement can be hiding an underlying flaw. If you see a beautiful hardwood floor with a rug in the middle that looks out of place with the rest of the decor, it might be there to hide a scuffed or pet-stained section.
Also be on the lookout for do-it-yourself projects the homeowner may have done, such as room additions or partitions, changes in the plumbing or added electrical wiring. Unless the owner is a professional, have these items inspected to make sure they were done correctly and according to code.
Steps to take before buying a house
Buying a home goes beyond making sure you’re not purchasing a property that will be a money pit. You have to be just as careful with the purchasing and financing side of the homebuying journey as well. Here’s what you should know about the real estate market and how to finance your home purchase.
Find a real estate agent
Hiring the right real estate agent can make the homebuying process a lot easier, especially if you’re a first-time homebuyer. Your realtor will learn what’s important to you and point you toward homes that fit your needs. They’ll also walk you through the process of making offers, negotiating concessions and closing on the sale.
An added bonus is they know what red flags to look for in a home during the walk-through and can help you spot many of the issues discussed above.
Finding a good real estate agent takes a little time, though. Interview two or three realtors before settling on the one you feel more comfortable with. Check client reviews and talk with family and friends who’ve recently bought or sold a home about their realtor. They can provide insight into the overall experience and steer you to the right person.
A good realtor will have the following qualities:
- Integrity: They’ll work in your best interest
- Knowledge of the neighborhoods you’re interested in: They’ll know the price range of homes in the area, whether it’s a competitive market and the pros and cons of the neighborhood
- Detailed knowledge of contracts and negotiation tactics: This ensures you’ll get the best deal that won’t fall through due to flaws in the sales contract
- Good communication skills: They should keep you updated on your search and how negotiations are progressing on a sale
- Experience: Simply put, they know the tricks of the trade and can help you avoid major homebuying mistakes
Don’t overlook the importance of a home inspection
A home inspection is an absolute must when buying a new house — it will tell you if the home is in good condition or if it needs repairs and what the scope of those repairs may be. Once your purchase offer has been accepted, you want to get the inspection done as quickly as possible.
The home inspector will look at all the major structural and mechanical aspects of a home. This includes inspecting the foundation, HVAC system, furnace, plumbing, electrical system, attic, basement, siding, paint and any appliances in the home. Some inspectors will also take a look at the roof as part of their general inspection. They can also perform tests, at the buyer’s request, for mold, Radon, lead, asbestos and termites.
The inspector will generate a report that details their findings and identifies items that need repair or replacement, as well as identifying potential problems. You, as the buyer, can then decide if you want to proceed with the home purchase.
Signs of poor maintenance
A well-maintained home is less likely to need costly repairs. Poor maintenance on small, routine items can indicate problems with larger and more important parts of the house. Some of the signs of poor maintenance on a home include:
- Burnt-out light bulbs or broken light fixtures
- Cracked, peeling or fading paint
- Leaky faucets or toilets
- Overgrown grass
- Weeds in the gutters
- Broken appliances
- Damaged masonry
Figure out how much house you can afford
While it may make sense at first to spend more on a home that’s in perfect condition, you’ll quickly regret that decision if you’re struggling to make the monthly mortgage payments or find yourself falling behind on other expenses. You may even run the risk of losing the home to foreclosure if you can’t make the monthly payments.
That’s why it’s important to set a budget and stick to it. Before beginning your home search, use a mortgage payment calculator to determine how much house you can afford. This will give you an estimate of how much your monthly mortgage costs could be and serves as a good starting point in determining the home price range you should look for.
The upfront costs of buying a home
The purchase price isn’t the only expense you’ll have when buying a home. There are closing costs, which include lender fees and other expenses associated with homeownership, that you need to take into consideration when setting your budget. These can add between 2% and 6% of the loan amount to the total cost.
You’ll also be required to make a down payment on the home. The ‘ideal’ down payment is 20% of the home’s sales price. This amount means you won’t have to pay for private mortgage insurance (PMI) — a policy that protects the lender if you fall behind on your payments.
However, the amount you’re required to put down will depend on the type of loan you get. A mortgage guaranteed by the Federal Housing Administration (FHA), for example, requires a minimum down payment of 3.5% of the home’s purchase price. A conventional loan can be obtained with as little as 3%, while a loan guaranteed by the Department of Veteran Affairs (VA) doesn’t require any down payment.
Once you have a budget, it’s time to look for financing options. There’s a big difference between the interest rates offered by different lenders, so it’s a good idea to shop around for a mortgage with three to five different lenders. Consider banks, online lenders, credit unions and mortgage brokers and compare what they offer. The best mortgage lenders will have the right combination of rates, terms, closing costs and fees.
Keep in mind that the housing market is undergoing a shift from the frenzy of the pandemic to a much slower pace of home sales. Current mortgage rates have nearly doubled since the start of 2022 and while housing prices have fallen somewhat, they are still relatively high compared to the pre-pandemic years.
All this makes the cost of borrowing much higher right now than it has been in the recent past. However, interest rates are forecast to fall back eventually. You will always have the option of refinancing your home loan in the future to get lower monthly payments.
Once you’ve chosen a lender, it’s a good idea to get a mortgage preapproval letter — it shows the seller you qualify for financing and the sale isn’t likely to fall through because of lack of funding. You’ll be required to submit your financial information, including your bank statements, employment verification, pay stubs and W2 forms.
The lender will obtain your credit report, which will contain your credit score and payment history. Combined with your financial information, the lender will then determine the maximum loan amount you could qualify for. Keep in mind, the higher your credit score, the lower the mortgage rate you’ll qualify for. There are several ways to improve your credit score if it’s too low.
You’ll have to pay property taxes on your new home. This tax is based on a percentage of the home’s value as appraised by the local government tax assessor. Tax payments are usually included in the monthly mortgage payment if you’re buying a home with borrowed money.
You may also have to pay a transfer tax, which can be charged by the state, county, municipality or a combination of any of the above. Who pays this tax varies by state, so make sure to check which taxes you’ll be liable for when buying property.
On the other hand, there are some tax benefits to a home purchase. You can deduct some of the mortgage interest payments if you itemize deductions when you file taxes. You may be able to deduct part of your property taxes as well. Talk to a tax expert to learn what you can qualify for.
Homeowners insurance is a must when buying a house. It reimburses the cost of property damage due to some natural disasters or in cases of theft or accidents. If you’re buying a home with a mortgage, your lender will require you to carry insurance as well.
Depending on the policy you choose, homeowners insurance will cover the cost of repairing or rebuilding a home in the event of a fire, vandalism and some natural disasters. Some events, such as floods and earthquakes, are excluded, which means you’ll have to get a separate policy to cover them.
Don’t get confused between homeowners insurance and home warranties. The latter is more of a service contract that covers the cost to repair or replace appliances, as well as plumbing and electrical systems. Warranties won’t cover structural damage or loss.
Contact an independent insurance professional to talk through the options and determine what kind of coverage meets both your needs and budget.
If you buy a home in a gated community, condominium or neighborhood with a homeowners association, you’ll have to pay a fee. The money goes toward the upkeep of and insurance for common areas and amenities such as pools or tennis courts. This fee is paid directly to the HOA and is in addition to your mortgage payments, insurance and property taxes.
HOAs also establish a set of rules, also known as covenants, designed to provide consistency in how the neighborhood looks, which in turn helps preserve home values. They also set community rules and can impose fines if they aren’t followed. Go over the rules before buying in an HOA community.
Summary of Money’s What to look for when buying a home
Bottom line: There are a lot of things you need to consider before buying a house. It takes attention to detail and patience to be able to spot potential problems in a home before you buy, but in the end, your efforts will be worth it. Buying a house is a good long-term investment because it will not only increase in value but also play a major role in your family’s safety and well-being.