Buying a home is one of the most significant investments you'll ever make, and a thorough due diligence process is essential to ensure you make an informed decision. Your due diligence period is your time to learn more about your potential new home and ensure you want to purchase it. A home inspection is a critical piece of the puzzle, but it is only one component of many that should be included in the process. Beyond getting a home inspection, here are five essential due diligence tips to help you make an informed and confident home purchase decision.
1. Get Multiple Insurance Quotes
Before purchasing a home, it’s crucial to understand the cost of insuring it. And, I’m not going to lie, homeowner’s insurance is a bit if a nightmare right now. Insurance prices can vary significantly based on the home's location, age, and construction type, as well as the insurer's own policies.
Why? Insurance costs can impact your monthly budget and overall affordability. Comparing quotes ensures you get the best coverage at the best price. Plus, there are some cases where the home might not be insurable at all, or insurable only if certain repairs are made, and it’s important you know this as soon as possible so that you can negotiate any needed repairs and make an informed decision about whether to move forward.
How? Reach out to several insurance companies, providing them with the same information about the property to get comparable quotes. Don’t forget to inquire about bundling discounts if you plan to purchase other types of insurance from the same provider. You can also enlist the help of an insurance broker to price shop on your behalf.
2. Get an Updated Monthly Payment Estimate
Knowing your monthly mortgage payment helps you manage your budget effectively and avoid future financial stress. Prior to going under contract, most estimates are general and might not accurately depict things like taxes and insurance which can drastically change your monthly payment. Plus, interest rates will change over time too. After going under contract, touch base with your lender for a more accurate estimate of cost.
Why? An accurate estimate helps you understand the true cost of owning the home, including principal, interest, taxes, and insurance.
How? Online mortgage calculators are not always accurate so be sure to consult with your lender to get an updated payment estimate based on current interest rates, property taxes, and insurance premiums.
3. Drive Your Commute
Living in your dream home can become a nightmare if the commute is too long or stressful. Also consider other frequent drives including childcare drop-off and proximity to airports or public transportation routes if that is important or relevant to you. Traffic patterns might not always be obvious, especially during off-peak hours, so it is wise to explore.
Why? Experiencing the daily commute firsthand gives you a realistic idea of what your routine will be like. You’ll want to be sure that the commute is doable and fits in with your lifestyle and specific needs.
How? Drive the route to your workplace or any other frequented location at the times you would typically travel. Consider traffic patterns, alternative routes, and public transportation options.
4. Research (and Fact Check) the Neighborhood
A home’s neighborhood can significantly affect your quality of life and property value. Try to learn as much as possible about the home and its surrounding area prior to purchasing so that you know you’re making an informed decision. It can be beneficial to research school districts, planned developments, crime rates, zoning maps, or anything else that is important to you.
Why? Understanding the neighborhood's character, safety, and amenities helps ensure it aligns with your lifestyle and future plans. Some changes can also negatively impact your property value so it’s beneficial to do as much research as you can on the front end. Plus, errors can happen. A home might be listed under the wrong school district. Double-checking these facts help to minimize any risk of surprise later. I once met a homeowner who moved into a neighborhood specifically to be on the golf course, only to realize after the purchase that the golf course had been sold to a developer and was no longer active. Don’t let that be you.
How? Visit the neighborhood at different times of the day and week. Talk to potential neighbors, check local crime rates, look at school district maps, fact-check any information given to you, and pay attention to signs of community activity like local parks, schools, and businesses.
5. Explore the Surrounding Area
Beyond the immediate neighborhood, the surrounding area plays a vital role in your overall satisfaction with your new home. Consider your current lifestyle and things that are important to you. If you must drive 20 minutes to the gym or grocery store and that’s a deal-breaker for you, it’s best to find that out before you’ve purchased the house.
Why? Proximity to essentials like grocery stores, hospitals, recreational facilities, and entertainment options can greatly enhance (or detract from) your living experience. If you’re used to convenience or walkability, driving 15-20 minutes to anything can be a major lifestyle shift so it is good to know and prepare up-front.
How? Spend time exploring nearby towns and amenities. Consider your daily needs and leisure activities to ensure the area meets your requirements. Websites like walkscore.com can be a great place to start.
While a home inspection is a critical step in the due diligence process, these additional actions will provide a comprehensive understanding of what to expect from your potential new home. By getting multiple insurance quotes, updating your monthly payment estimate, driving your commute, researching the new neighborhood, and exploring the surrounding area, you’ll be well-prepared to make an informed and confident home purchase decision.Taking these steps can significantly reduce the risk of unexpected surprises and ensure that your new home is a good fit for your lifestyle and financial situation. Happy house hunting!
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