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 may be tempted to shop for homes you can’t actually afford. By getting pre-approved as a buyer, you can save yourself the grief of looking at houses outside your budget. You also put yourself in a stronger negotiating 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 mortgage carefully. Used to be the emphasis when it came to mortgages was on paying them off as soon as possible. Today, with historically low mortgage rates, and the debt the average person will accumulate due to credit cards, student loans, etc. means it may be 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 you want to. Additionally, when picking a mortgage, your realtor may be able to negotiate seller-paid closing costs and your first year’s property taxes and homeowners insurance.
Do your homework before bidding. Before you make an offer on a home, hire a real estate agent who will show you sales trends of similar homes in the neighborhood. Sites like Zillow can be unreliable. An agent has access to sales prices of similar homes in the neighborhood. If homes have recently sold for 5 percent less than the asking price, your realtor may suggest offering a lower price than what the seller is asking. Either way, working with a good mortgage lender and a real estate professional will help you get into the home of your dreams with the least amount of stress and expense.