As the events of the last few years in the real estate industry show, some people forget about the tremendous financial responsibility of purchasing a home at their peril. Here are a few tips for dealing with the dollar signs so that you can comfortably move into your new home.
Get pre-approved. Sub-primes may be history, but you can avoid being shown homes you can’t actually afford by getting pre-approved as a buyer. You can save yourself the grief of looking at houses you can’t afford and also put yourself in a better position to make a serious offer when you do find the right house. Unlike pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head.
Choose your lender and mortgage carefully. A good Realtor can connect you to a reputable lender who will not try to sell you on a loan but will operate like a consultant giving you options to chose from that best suit your financial circumstances. When it came to mortgages in the past the emphasis used to be on paying them off as soon as possible. Today, with mortgage rates being so low and the extra debt the average person will accumulate due to credit cards, student loans, etc. means it’s better to opt for the 30-year mortgage instead of the 15-year. This way you have a lower monthly payment with the option of paying additional principal payments when you have the extra money to do so. Additionally, when selecting a mortgage, you usually have the option of paying points (a portion of the interest that you pay at closing) in exchange for a lower interest rate. If you plan to stay in the house for a long time you may want to consider it….Paying the points can save you money in the long run. Please recognize this advice will vary from one person to another depending on your particular situation so always seek good objective counsel from your experienced realtor and lender.
Do your homework before bidding. Before you make an offer on a home, have your real estate agent do some research on the sales trends of similar homes in the neighborhood. Your Realtor will have the most accurate data versus some of the 3rd party sites like Zillow and others who’s data is often inaccurate . Consider especially sales of similar homes in the last three to six months. For instance, if homes have recently sold for 3 percent less than the asking price, your first offer should probably be about 5 to 6 percent lower than what the seller is asking. That said, your offer range will also need to take into account the time on the market. The offer you make on a home that’s been on the market for just a couple days is far different from the offer you make on a home that’s been for sale for several months or more. A good Realtor will be able to guide you through the offer and negotiation process to achieve the purchase of your home.