As the events of the last few years in the real estate industry show, 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 take down that “for sale” sign on your new home.
Get pre-approved. Sub-primes may be history, but you’ll probably still be 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. You can 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.
What’s important when choosing a Lender? Rates are always important to compare when selecting who will provide your mortgage however that’s not the only thing to consider. One of the most common reasons for your earnest money to be lost is due to mortgage providers not being able to service your loan. Not being able to complete the loan by your scheduled closing date and missing deadlines that give you a chance to object and get your earnest money back is easily avoidable with clear communication. Ask your Realtor who they prefer to work with. Realtors work with tons of lenders however there are always a few that they prefer to work with. This is because they know that lender will perform their duties ahead of schedule, they will not put their clients at risk and will ensure a smooth closing. If the rates you’re comparing are within a quarter to a half percent, opt on the side of whoever was the most responsive and communicated clearly and accurately.
Choose your mortgage carefully. Used to be the emphasis when it came to mortgages was on paying them off as soon as possible. Today, the 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 an additional principal when money is good. Additionally, when picking a mortgage, you usually have the option of paying additional 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—and given the current real estate market, you should—taking the points will save you money.
Do your homework before bidding. Before you make an offer on a home, your Realtor® will will help you research on the sales trends of similar homes in the neighborhood. Don’t rely on sites like Zillow to provide the most accurate information. Consider especially sales of similar homes in the last three months. For instance, if homes have recently sold for 5 percent less than the asking price, your opening bid should probably be about 8 to 10 percent lower than what the seller is asking.
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