|
Why
You Should Not Make Any Major Credit Purchases
Don't go on a spending spree using credit
if you are thinking about buying a home or
in the process of buying a new home. Your mortgage
pre-approval is subject to a final evaluation
of your financial situation.
Every $100 you pay per month on a credit payment could cost you about $10,000
in home eligibility. For example, a car payment of $300/month could mean that
you qualify for $30,000 less in a mortgage.
Even if you have accumulated
enough savings, you should
consider not making
any large purchases until after closing. The last thing you want is to know
that you could have purchased a new home had you curbed the urge to spend.
Getting a Legitimate Lender and Getting
Pre-Approved
It used to be that buyers could
go house shopping and when they
had found their dream home, then
they go to get pre-approved. However, in today's
market, that has proven to be one of the least
effective methods in landing the dream home.
Most lenders can pre-qualify you for a mortgage over the phone. Based on
general questions about your income, debt, assets, and credit history, lenders
can estimate how much mortgage you qualify for. However, being pre-qualified
and pre-approved are different things. Pre-approval means that you have applied
for a mortgage; you have filled out the mortgage application, received your
credit report, and verified your employment, assets, etc. When you are pre-approved,
you know exactly what the maximum loan amount will be.
A pre-qualified letter is not verified and in essence, does not count for
much if you are competing with other buyers who are pre-approved. When you
are pre-approved, you and the seller know exactly how much house you can afford.
It gives you credibility as an interested buyer and lets the seller know immediately
that you will qualify for a loan to buy their property.
In addition to being pre-approved, it's important to be pre-approved with
a legitimate lender. Legitimate lenders include: banks, mortgage bankers, credit
unions, savings and loan associations, mortgage brokers, and online lenders.
Some lenders to avoid: those who lose a form or misplace a file, those who
gather information from you in an unorganized manner, those who are not informed
about interest rates, points or costs, and those who cannot provide you with
the right information.
Build a Plan of Action and Get Ready
Buying a home will probably rank as one of
the biggest personal investments one can make.
Being organized and in control will contribute
significantly to getting the best home deal
possible with the least amount of stress. It
is
important to anticipate the steps required to
successfully achieve your housing goal and to
build a plan of action that gets you there.
Before you can build a plan of action, take the time to lay the groundwork
for your decision-making process.
First, ask yourself how much can you afford to pay for a home. If you're
not sure on the price range, find a lender and get preapproved. Preapproval
will let you know how much you can afford so that you can look for homes in
your price range. Getting pre-approved helps you to alleviate some of the anxieties
that come with home buying. You know exactly what you qualify for and at what
rate, you know how large your monthly mortgage payments will be, and you know
how much you will have for a down payment. Once you are pre-approved, you avoid
the frustration of finding homes that you think are perfect, but are not in
your price range.
Second, ask yourself where you want to live and what is the best location
for you and/or your family.
Things to consider:
- convenience
for all family members
- proximity
to work, school
- crime
rate of neighborhood
- local
transportation
- types
of homes in neighborhood, for example
condos, town homes, co-ops, newly constructed
homes etc.
Hot, Normal, and Cold Markets
Hot
Market -
This is an extremely competitive market, one that is advantageous to the
seller. Sometimes, homes will sell as soon as they are listed or even before
homes are listed. Typically, during a hot market, multiple offers will be made
on each home and more often than not, homes will sell for more than their asking
price. It is even more crucial to be prepared and to be ready as a buyer when
the market is hot. It can be easy to get caught up in the bid for a home, but
if you are prepared (pre-approved, solid in price range, realistic about your
needs), it is easier to remain focused on your housing needs and price range.
Normal Market -
In a normal market, there is fairly a large number of homes available and
an average number of buyers. This market does not necessarily favor the buyer
or the seller. A seller may not have as many offers on their home, but he or
she may not be desperate to sell either. Again, it is the buyer's responsibility
to be prepared. During a normal market, the chances to negotiate are higher
than in a hot market. As a buyer, you can expect to make offers at lower than
the asking price and negotiate a price at least somewhat less than what the
sellers are asking.
Cold Market -
In a cold market, houses may be listed for more than a year and the prices
of houses listed may drop considerably. This market is advantageous to the
buyer. As a buyer, you have the time to make an offer that works to your best
interest. It is not uncommon to low-ball and to find that sellers are accommodating
to meet your needs. Keep in mind that even though this market is a great time
for buyers, you do not want to lose your dream home by being unrealistic. Your
goal is to get the your dream home at the best possible price.
Importance of Inspection
As a buyer, you are entitled to know exactly
what you are getting. Don't take for granted
what you see and what the seller or the listing
agent tells you. A professional home inspection
is something you MUST do, whether you are buying
an existing home or a new one. An inspection
is an opportunity to have an expert look closely
at the property you are considering purchasing
and getting both an oral and written opinion
as to its condition.
Beforehand, make sure the report will be done by a professional organization,
such as a local trade organization or a national trade organization such as
ASHI (American Society of Home Inspection). Not only should you never skip
an inspection, but also you should go along with the inspector during inspection.
This gives you a chance to ask questions about the property and get answers
that are not biased. In addition, the oral comments are typically more revealing
and detailed than what you will find on the written report. Once the inspection
is complete, review the inspection report carefully.
You have to demand an inspection when you present your offer. It must be
written in as a contingency; if you do not approve the inspection report, then
you don't buy. Most real estate contracts automatically provide an inspection
contingency.
Avoiding Financial Stress
By asking the right questions, and knowing
exactly what your needs are, you can find the
right loan for you. There are certain approaches
that you can take while mortgage shopping that
can cost or save you money.
It is still true that the better qualifications you have, the lower your
interest rate will be. However, there are mortgages available for almost everyone;
it's the interest rates or the down payments that vary.
Before speaking with a lender, know what monthly dollar amount you feel
comfortable committing to. Then when you discuss mortgage pre-approval
with your lender, it is easier for you to determine the monthly amount
and what value of home the monthly amount translates into. Do not put
yourself in the position where you will be paying more each month than
you intended simply because the "dream" house
requires it.
Do your research on the types of mortgages available to you and find the
one that best suits your needs.
There are a number of considerations to be
made in terms of finding the best mortgage for each individual:
- What
type of market are you in? Are the interest
rates falling or rising?
- Do
you want a fixed mortgage rate, where you
will always know what your payment is going
to be?
- What
are your long-term goals? Do you intend
to resell the property? Do you only need
the mortgage for a short time?
|
