Image: Eric O'Connell/Getty Images
About This QuizWith low interest rates and home prices, it feels like a great time to buy a house. Homeownership is about more than your mortgage payment, though, so before you hand your real estate agent that earnest money, you might want to consider whether you're really ready to buy. Think you know all there is to know about buying a house? Test your knowledge with this quiz!
Before you begin shopping for a home, what's the most important thing to do?
Save up for a down payment.
Make sure your credit is in good shape.
both of the above
You avoid paying private mortgage insurance or taking out a costly second loan by forking out that down payment in cash, and a good credit score will help you nab the lowest possible interest rate. If you don't have the down payment or good credit, it's not time to buy.
What's the best way to decide on your price range when shopping for a home?
Your monthly payment, including mortgage, taxes, insurance and association fees, should be around 18 percent of your monthly income.
Your monthly payment, including mortgage, taxes, insurance and association fees, should be around 28 percent of your monthly income.
While some financial experts say the percentage can be as low as 25 percent or as high as 33 percent, 28 percent of your monthly income is a safe bet when calculating your payment.
Your monthly payment, including mortgage, taxes, insurance and association fees, should be around 38 percent of your monthly income.
Which of the following homes should you walk away from?
The house is in a great school district but has only one bathroom.
You're not crazy about the street the house is on, but it has the front porch you always dreamed of.
When you own a home, you can always save up for renovations. The thing that you can't change is the house's location.
You hate the tile in the kitchen, but you love the neighborhood.
You shouldn't buy a house if you're not planning to stay in the same city for at least:
If you're used to moving to a new rental every 6 months, 5 years in one place might seem like a long time. That's about how long it takes to build up equity in a home.
Your home inspection reveals that a house needs a new roof and the electrical system isn't up to code. You should:
See if the seller would be willing to complete the repairs before closing.
You can try to negotiate an inspection contingency where the seller agrees to repair some or all of the problems, or the contract becomes void. The seller doesn't have to agree, and if he won't repair the home, it might be time to walk away.
Push back closing so you can repair the electrical system before moving in.
Closing costs can run several thousand dollars. If you don't have cash to cover them:
You shouldn't buy the house.
You should try to negotiate lower fees with your lender.
You can roll closing costs into your home loan.
Most lenders will allow you to finance your closing fees; just make sure you can afford the higher monthly payment that goes along with borrowing more money. You can also try to have the seller cover your closing costs, though this is a little bit less common.
The house you're looking at is what some might call a fixer-upper. What should you consider when deciding whether to buy?
Do you have the time and money to get the house back into good shape?
Is it in a good location?
both of the above
If you're buying a house that needs some love, you want to make sure you have the money and energy to fix it up. Get a quote from a contractor on any renovations and make sure you can afford the additional monthly payment. Remember, real estate is all about location. You can always repair a house, but you can't change where it is.
When might you be better off renting than buying a home?
You are looking to relocate in the next few years.
If you're planning to move to another city within the next few years, renting is your best option. While you might want to downsize your home when the kids move out, that doesn't mean you shouldn't look into buying.
Your kids are all in college.
both of the above
Eric O'Connell/Getty Images