Tip #2: Make A Plan
And Get Pre-Qualified
Carefully examine each
important decision and think it through. Develop a well
organized plan for making your home purchase. Focus on the
most important factors. Create file folders on house hunting,
home financing, service providers, etc. Get yourself pre
qualified for a loan so you can determine the amount of home
you can afford. Getting pre qualified also increases your
chances of closing a deal, The seller is more likely to accept
an already funded offer than one from a home buyer who still
needs to get a loan. Lenders usually employ the 28% formula
(your monthly mortgage must not exceed 28% of your monthly
income) in approving your loan. Plan your actions and get pre
qualified, this reduces the chance of panic situation and
allows you seize opportunity when it is presented. A
thorough plan will save both time and money!
Tip #3: Value, Value,
Value
The days of 10-30% annual
appreciation still exist. Home buyers in the 1990's benefited
tremendously from what seemed like ever appreciating home
prices, now we are seeing growth along the same lines.
Nowadays, you're looking at stable growth while guarding
against the possibilities of falling prices, low interest
rates and corporate layoffs that can dramatically affect your
home values. The classic rule of buying the worst house in the
best neighborhood still applies. If you buy with an eye
towards improvement, you can customize the home to fit your
needs. The saying, "make money buying a home, not selling
one," should keep you focused on the long-term importance of
the purchasing price.
Tip #4: Create A Top
10 List of Amenities
When shopping for a home,
list the features (fireplace, fenced-in yard, new appliances,
etc.) that are most important to you in deciding on which home
to purchase. Establishing "your criteria" early on will save
time shopping for inappropriate homes and may keep you from
buying a home on a whim -- for example, because of a circular
stairwell -- that doesn't meet your fundamental requirements.
As detailed in Tip #3, your top reason for buying a home
should be the value you are getting. Some of your top 10
amenities should logically be sacrificed if an incredible
value is available.
Tip #5: Fixed vs.
Adjustable Rate Mortgages
Which type of loan fits your
particular needs? Are you a first home buyer or are you moving
to a larger home? If you're planning to own for a short time,
an ARM may be the best type of loan. If you're shopping for
your dream home or you plan to raise a family, a fixed rate
mortgage may be more suitable for you. If you choose an ARM,
the index should be based on the Cost of Funds Index if rates
are increasing, and Treasury Bills if they are decreasing. The
COFI's are less volatile over time than T-Bills. Find out the
what the teaser rate is and what the real rate would be.
Whichever loan you choose,
make sure that you scrutinize all the closing costs. If
you are required to have a mortgage escrow account and private
mortgage insurance, make sure you understand the terms and
cancellation procedures. Also, make sure there are no
prepayment penalties so that you can utilize an accelerated
mortgage plan. A good mortgage reduction plan can save you
tens of thousands in interest costs, and shorten your loan
term, with only small extra principal payments. If you
experience negative changes in your job, health, or marital
status, you can revert to the standard payments in your
mortgage contract.
Tip #6: Sign A
Contract That Protects You
Make sure that the contract
you put on a house allows you to arrange financing, inspect
the home and negotiate any problems that you uncover. Ensuring
that the contract you sign will minimize potential legal
battles will let you swim in your new pool with your family
and neighbors instead of with the sharks.
Tip #7: Put Yourself
In The Seller's Shoes
You are about to make one of
the most important decisions that will affect both your life
and the life of the seller. If you take time to understand the
reasons the seller bought the home, their reasons for selling,
and the home improvements they have or have not made, you'll
be in a better position to evaluate the home and negotiate a
better deal. In the end, the home buying process excludes the
professionals and comes down to the individuals buying and
selling the home. A closer look at the seller may help you in
deciding whether and for how much to buy a particular home.
Tip #8: Develop A
Mortgage Shopping Chart
One of the biggest decisions
to make before putting a contract on a home is how to finance
the purchase. There are 10,000 lenders competing for your
mortgage business. The days of simply walking into the
community bank and negotiating with the loan department
manager are over. Today, you can apply for a loan over the
Internet or even use a mortgage broker to shop for your loan
with hundreds of lenders. When choosing a lender, you want to
avoid apples to oranges contrasts by comparing fixed rates to
fixed rates, not fixed to ARM's. Create a chart that lists
different types of loans, fees, and at least five mortgage
providers (including a mortgage broker).
Tip #9: Get A Quality
Home Inspection
Although it is hard to
believe, more people pay for inspections before buying used
cars than when making the biggest investment of their lives --
their homes. Paying for a qualified home inspection before you
buy a home isn't just spending "a little extra" for peace of
mind; it's absolutely essential for anyone who doesn't want to
spend thousands of dollars for repairs.
Tip#10:
Peace of Mind: Home Protection
Plans
To protect both yourself as a
buyer, as well as the seller, it is a good idea to purchase a
home protection plan. What exactly is it? A home
warranty, or home protection plan, is a service contract,
normally for one year, which protects homeowners against the
cost of unexpected repairs or replacement on their major
systems and appliances that break down due to normal wear and
tear. A negotiable contract between the buyers and sellers
which do not overlap or replace homeowner's insurance policy,
this type of warranty can save the new homeowner lots of
headaches, as well as put seller's fears to rest. The
warranty covers mechanical breakdowns, while insurance
typically repairs the related damage, for example: if a hot
water heater burst and destroyed a wall in your home, the
warranty would repair the water heater and your insurance
would pay to fix the wall.
