As we have all learned from past events from a few years ago that unfortunately sometimes people forget about the tremendous financial responsibility of purchasing a home at their peril. Here are just a few tips to help you avoid making those financial mistakes and to help you take down that “for sale” sign on your new home.
Get pre-approved.
This is the most important thing to do if you are seriously searching for a new home. Know your buying power. 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.
Choose your lender and mortgage carefully.
It 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, sit down with your REALTOR or ask your REALTOR to do some research on the sales trends of similar homes in the neighborhood or within a mile or two of that area if there are no recent sales in that neighborhood. Consider especially sales of similar homes in the last three months. For example, if your in a buyers market and 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.
