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Buying a Home? Here's 11 Keys to Know
As you begin your home-buying search in earnest, and look at available financing options, here are some of the most important things to keep in mind:
- Review your personal credit.
- If you're like most people, you will most likely need a mortgage to purchase your home.
Prior to approving your loan, and determining the interest rate that will apply, lenders will review your credit history very carefully. At stake, over the lifetime of a loan, could be tens of thousands of dollars or more, so several months before you begin a serious search for a home, it is recommended that you get copy of your credit report, or you may get a 3-in-1 Credit Report that provides you with a side-by-side comparison of your credit reports on all three credit bureaus - Equifax, Experian, and TransUnion. Make sure your reports are accurate, and if you discover information that you believe to be incorrect, contact the appropriate credit bureau(s).
- Buy a home you can afford.
There is a general rule-of-thumb that says you can afford to buy a home that costs approximately two-and-one-half your annual salary. This is just a basic guideline. For a more detailed analysis, consumers may use an online mortgage calculator to gain a better understanding of your mortgage, approximate payments - and how they compare to your income, debts, and monthly expenses.
- Remember, your deposit can vary widely according to lender.
Many consumers are under the misconception that putting 20% down on a mortgage loan is always required. This is not true. Many major lenders are willing to offer competitive loan packages to qualified buyers, often with as little as 3-5% of the total purchase price.
- Location, Location, Location:
If a home's enduring value is a priority to you, and it is to the majority of home buyers - this real estate axiom is one you can take to the bank. The value of real estate is closely tied to location. From an area's general desirability to its proximity to preferred amenities, including community services, ready access to freeways, shopping, entertainment venues, etc. - location is key. Another key factor in determining a home's long term value is the quality of its school district where your home will be located. This is an important factor in maintaining the value and marketability of your home in the future. Even if you don't have children, it's important to know that school districts with good reputations are given a high priority by many new home buyers - and this will directly affect your property's value.
- Experts recommend that you strongly consider paying additional points:
If you plan on remaining in the home for five years or more. When you choose a mortgage, you normally can choose to pay additional points, a part of the interest you pay at closing - in return for receiving a lower interest rate on your loan. The additional points you pay upfront, could save you a significant amount of money over the life of your loan!
- It makes sense to get pre-approved!
Imagine looking around for the "home of your dreams" and then finding out you've been dreaming of something you just can't afford. Getting pre-approved from a lender, based on your personal financial situation, including credit history, income, and debts will allow you to home shop with confidence and with a clear, realistic goal in mind.
- A little advance scouting can save a lot of money!
Before you place a bid on a home, it pays to get the details on recent sales in the same neighborhood. If you learn that recent homes are typically selling at 10% less than the original asking price, many real estate experts recommend that you place a home bid of 12-15% less than the asking price. This is just a guideline Other factors that may affect your bid, include the real or perceived level of buyer activity/interest in the home, along with the length of time the house has been on the market.
- Contract with a home inspector.
Hire your own home inspector, a person who has extensive experience in doing home surveys and inspections in your area. Even though lenders will require a separate appraisal that is necessary for the bank to be assured that the house is truly worth what you will be paying, you'll still want to have your own inspection so that you can learn of potential problem areas that could cost you in the future.
- Professionals Make The Difference.
Today more and more home buyers are using the Internet to save and travel time in gaining easy access to home listings. Despite this, it still makes sense to utilize real estate professionals. Unless you are very familiar with the real estate market in the geographical area where you will be buying, working with a local professional, preferably an exclusive buyer agent is recommended. With this professional at your side, keeping your family's best interests at heart, you can work together to find the right home at the right price.
- Keep your cool.
It's exciting to buy a home. It's also exciting to know that, in many areas, houses are appreciating rapidly. Even though the market may at times be red hot, you still need to keep your cool. Many people often feel pressured to buy now, or "jump in" so they don't get "priced out" of the market. Don't let periods of real estate hyper-enthusiasm get to you and cause you to make rash decisions. Generally, home buying has been an excellent long-term investment. Buying speculatively with the dream of turning a quick double-digit profit can be a dangerous and costly game. Housing markets, like all markets, never go up in a straight line. Buy a home you can afford, and get the loan that is right for you. Beware of interest-only loans, and other financing that takes advantage of an out-of-control, escalating markets!