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.
Choose your lender. The lender’s role in the transaction is crucial. Please ask your Realtor for recommendations of lenders they use and that their clients have loved. There are so many questions to ask a lender – I can help you with these. Please use a local lender, who knows the conditions (dirt roads, wells, septic, etc) and uses local appraisers. Underwriting “in house” makes it all go a little easier. Because Real Estate doesn’t just happen Monday-Friday 9-5, you’ll want a lender who works the hours you and your Realtor do.
Get pre-approved. By 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 mortgage carefully. 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.
Talk to your lender about different packages. They change all the time. Together you can choose which works best for you.
Do your homework before bidding. A serious professional Realtor will do the homework for you. What is the market doing? Is it a Buyer’s or Seller’s market. What are the comps (properties like the ones you’ve chosen that have sold recently)? Average DOM (Days on the Market), List / Sold %. Is this a market with multiple bids? When did the Sellers purchase and what do they owe. No reason for you to do the homework, when working with a professional!