House Buying Tips
Hunting for your dream home can be both exciting and frustrating. In your head, you know what you want but the reality of finding it is something entirely different. It has to do with price, location, new home versus older home, credit, and how long you plan on staying there. You also need to think about whether you are ready for a new home. Homes require a lot of upkeep and not everyone is cut out for the work. If you are determined to buy a new home and want some house buying tips, this is the right article for you.
Work On Your Credit
You are going to find that buying a house will be much easier if you have good credit. If you don’t know what your credit is, you can do a credit check at an online site such as FreeCreditReport.com. Many of these credit sites charge a fee but you can check your credit history one time for free.
If you have bad credit, you need to do some damage control before buying a house. To fix your credit, get a copy of your credit report and go through it to make sure all the information is accurate. Bad accounts have a shelf life of seven years so if there are any reports on your credit history that are over seven years, you need to contact the credit reporting bureau and have them remove it.
If you have bad credit due to outstanding accounts, try to take care of them as soon as possible. When you pay off an account in full, the collection department is suppose to report that account has been paid. Every time you get an account paid off, it will improve your credit.
Once you get your credit taken care of, you need to check out possible lenders. LendingTree and Wells Fargo are but two of several national financial institutes that handle mortgages. You can also check out your local banks and see if they handle mortgages. With the mortgage crisis in the U.S., there are fewer lenders than there use to be. You can also do an Internet search for other possible lenders.
Once you find a lender, you need top get pre-approved before you go through the ordeal of finding and bidding on a new home. By getting pre-approved, you will know how much a lender is willing to loan you and will help in narrowing down the search.
Choosing The Right Mortgage Loan For You
When it comes to mortgage loans, there are two basic types. Fixed Rate Mortgage (FRM) and Adjustable Rate Mortgage (ARM) determine the interest rate on your mortgage. Fixed rate means that the interest rate is locked in and does not vary according to the market. The benefit to this is that if interest rates go higher, your mortgage rate will be lower and thus save you money. However, if the interest rates fall, then you are stuck paying a higher rate with a fixed rate mortgage.
With an adjustable rate mortgage, the interest rates follow the market levels and, depending on the market, you could spend more or save more on the interest. Right now interests rates are at an all-time low and home owners with adjustable mortgages are saving quite a bit of money every year.
Get An Agent
Buying a house can be pretty involved. You can try to do it yourself but without a working knowledge of real estate laws and business, you will be at a disadvantage. The best option is to hire a realtor who can negotiate for you. Realtors know strategies about buying homes and can tell you whether a home is a good investment.
Don’t Buy If You Can’t Stay
Buying a home can cost you quite a bit of money. It is also an investment that will become more valuable with time (if the proper maintenance is done). When buying a home, you need to consider how long you plan on staying there.
If you are only going to be there a few years, then you should reconsider buying an expensive home. You will not have had enough time to build up enough equity in order to pay off the mortgage and have enough left over as a down payment for a second home.
If you plan on being in one place for a long time and are looking for a home to raise a family in, then the effort and closing costs is worth the purchase. This is a house that will only appreciate over time and in ten to twenty years, when the mortgage is paid off, you will have a home that is worth more than you paid for it.
Speaking of paying for a home, let’s talk affordability. Part of the problem with the current mortgage crisis was too many people being approved for homes that they could not afford. When shopping for a new home, be realistic about what you can afford. A house is something to enjoy. You should not be worried about making that mortgage payment every month not about what will happen if you lose your job.
It is easy to get starry-eyed about new houses. When looking at homes, think about what you need and don’t need. If you don’t need extra bedrooms, a game room, and a study, then steer clear of those homes.
Make A Down Payment
If at all possible, start saving for a down payment. A standard down payment is around 20 to 25% of the total house price. If you can manage to come up with this amount, then it will save you that much in the form of a loan and interest. A down payment will also take care of closing costs which can run anywhere from $1,000 to $2,000.
If you cannot make a down payment, do not fear. Many lenders deal in loans that require very small down payments. Some go as low as 3% of the total price of the house. Shop around for a lender that suits your needs if you don’t have 20% down.
Look At The Neighborhood
Just because a house is cheap and affordable doesn’t mean it is the right one for you. You need to consider what is around the house, not just the house itself. What do the neighboring houses look like? If you have kids, are there any schools nearby? How far of a commute would it be to work? What is the crime rate in that part of town? These factors should be carefully considered before placing a bid on a home.
Make Sure You Are Ready
Homes provide a lot of benefits, such as privacy and freedom to do what you want with the house. But there are also some drawbacks. You need to consider whether you are ready for a home. Some of the things you will have to worry about with owning a home are taxes, ongoing maintenance, high electric bills, yard care, obeying city ordnances, and insurance. It takes a lot of work to maintain a home. If you are unable to do that, because of time, finances, or motivation, then owning a house may not be for you.
This entry was posted on Friday, January 25th, 2013 at 7:17 am and is filed under Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.