With mortgage rates at all-time lows, and a huge increase in foreclosures, it is no surprise that many apartment-dwellers are ready to become homeowners. Buying your first home is very exciting, but also very scary and ripe for disaster. Before making the biggest investment of your life, use the tips below to make the process easy and error-free.
Buying vs. Renting: Before buying a house, it is essential to look at the pros and cons of buying vs. Renting. A house is a long-term investment. You will own the land as well as the building. Your payments will no longer disappear but are instead equity that can be pulled back out if financially necessary. The large amount of mortgage interest may seem like a bummer at first, but consider that mortgage interest is tax deductible. That could mean you go from paying the government, to getting a refund. Of course, this all sounds great, but it does not mean you can afford house payments. There are a number of mortgage calculators online that can help you figure out what you can afford. Remember to add on maintenance costs to any potential house payment. Apartment maintenance is usually free, home maintenance is not. Finally, do not forget the down payment! In the days before the mortgage crisis, 100% financing was easy to get. Those days are over, and you will have to put at least 3. 5% down. If you do not have that kind of cash, keep renting and build up your savings.
Educate yourself: The smartest first-time homebuyer is the one who does his or her own research before finding a real estate agent. Use the mortgage calculators to get an idea of your price range. Then scour the open house ads in the newspaper each week, and visit as many as you can. Advertised open houses do not require you to have an agent. The more homes you visit, the easier it will be to know what you want when the time comes to buy. Online research can be helpful, too. Zillow, Redfin, and Yahoo are just a few websites with easy-to-use home search features. If possible, read some books on the home-buying process to familiarize yourself with real estate lingo. Never underestimate the power of word-of-mouth, either. Talk to friends, family, and co-workers who have recently bought homes. Try to know as much as possible about the process of buying a home in order to limit potential surprises.
Review Your Finances: Real estate agents generally will not work with you if you are not pre-approved, and pre-approval starts with a credit check. Your credit score gives lenders a good idea of whether they want to take a risk and loan you the money. What defines a good credit score? 700+ these days. Finding out your score will cost a few dollars with each credit agency, but it is good to know if you need to do some fix-it work before you go to the lender's office. You are entitled to one free credit report per year, and if your score is too low, that will tell you why. Once you are ready to actually get the loan, your finances will have to be in good shape as well. This means you better have some savings built up, or at least a debt-to-equity ratio of 40%. Fixing a dire financial state can take years. In the meantime, see if you can get a close family member to sign as a co-borrower. Remember, though, that if you can't afford those payments, you should not be buying a house!
Don't Let Yourself Be Bullied: A typical first-time buyer mistake is to let their lender talk them into a certain loan right off the bat. An educated buyer, however, will know about the types of loans going in (15-year vs. 30-year, ARM vs. Fixed). Never allow your lender to bully you into a financial situation that makes you uncomfortable. If it sounds too good to be true, it probably is. Also, remember that you do not have to get your loan from the same lender who pre-approved you. Always go to more than one lender and find the best deal. Make sure your lender is familiar with first-time homebuyer programs as well. Another potential bully is your real estate agent. You might think they are working for you, but the honest truth is that they are in business for themselves. Agents make money through commissions from sales. This means that you could end up with an agent who is a little too eager to get you into a house. Never let yourself be rushed! Another sneaky trick is when an agent shows you more expensive homes first. Those houses might be a little out of your price range, but the agent is hoping you will fall in love and buy the house regardless. A good real estate agent will work to find what you want in your price range, or at least be honest if your expectations are too high.
Compare Homes: Since almost any house can seem like an upgrade from an apartment, it is easy for a first-time homebuyer to want the first house they see. This is a big mistake. Compare, compare, compare. If your agent or the seller's agent tells you there are multiple bids on the house, it could be a tactic to get you to buy, or it could be legitimate. Talk to your agent about the consequences of making an offer. Your initial offer is never set in stone, but make sure your agent is clear about the window of time for backing out. If you are going to make an offer on a home, visit it more than once, at different times of day if possible. Even simply driving by the house at night might give you a different perspective on the neighborhood. Be sure to take pictures inside the house so that you have a reference when those nagging questions come up.
It is still a buyers market. There is an increasing amount of affordable homes out there just waiting for first-time buyers. Do your homework and make your decision with confidence. Following the tips above is a great start. The right home can be the investment of a lifetime. - 31387
Buying vs. Renting: Before buying a house, it is essential to look at the pros and cons of buying vs. Renting. A house is a long-term investment. You will own the land as well as the building. Your payments will no longer disappear but are instead equity that can be pulled back out if financially necessary. The large amount of mortgage interest may seem like a bummer at first, but consider that mortgage interest is tax deductible. That could mean you go from paying the government, to getting a refund. Of course, this all sounds great, but it does not mean you can afford house payments. There are a number of mortgage calculators online that can help you figure out what you can afford. Remember to add on maintenance costs to any potential house payment. Apartment maintenance is usually free, home maintenance is not. Finally, do not forget the down payment! In the days before the mortgage crisis, 100% financing was easy to get. Those days are over, and you will have to put at least 3. 5% down. If you do not have that kind of cash, keep renting and build up your savings.
Educate yourself: The smartest first-time homebuyer is the one who does his or her own research before finding a real estate agent. Use the mortgage calculators to get an idea of your price range. Then scour the open house ads in the newspaper each week, and visit as many as you can. Advertised open houses do not require you to have an agent. The more homes you visit, the easier it will be to know what you want when the time comes to buy. Online research can be helpful, too. Zillow, Redfin, and Yahoo are just a few websites with easy-to-use home search features. If possible, read some books on the home-buying process to familiarize yourself with real estate lingo. Never underestimate the power of word-of-mouth, either. Talk to friends, family, and co-workers who have recently bought homes. Try to know as much as possible about the process of buying a home in order to limit potential surprises.
Review Your Finances: Real estate agents generally will not work with you if you are not pre-approved, and pre-approval starts with a credit check. Your credit score gives lenders a good idea of whether they want to take a risk and loan you the money. What defines a good credit score? 700+ these days. Finding out your score will cost a few dollars with each credit agency, but it is good to know if you need to do some fix-it work before you go to the lender's office. You are entitled to one free credit report per year, and if your score is too low, that will tell you why. Once you are ready to actually get the loan, your finances will have to be in good shape as well. This means you better have some savings built up, or at least a debt-to-equity ratio of 40%. Fixing a dire financial state can take years. In the meantime, see if you can get a close family member to sign as a co-borrower. Remember, though, that if you can't afford those payments, you should not be buying a house!
Don't Let Yourself Be Bullied: A typical first-time buyer mistake is to let their lender talk them into a certain loan right off the bat. An educated buyer, however, will know about the types of loans going in (15-year vs. 30-year, ARM vs. Fixed). Never allow your lender to bully you into a financial situation that makes you uncomfortable. If it sounds too good to be true, it probably is. Also, remember that you do not have to get your loan from the same lender who pre-approved you. Always go to more than one lender and find the best deal. Make sure your lender is familiar with first-time homebuyer programs as well. Another potential bully is your real estate agent. You might think they are working for you, but the honest truth is that they are in business for themselves. Agents make money through commissions from sales. This means that you could end up with an agent who is a little too eager to get you into a house. Never let yourself be rushed! Another sneaky trick is when an agent shows you more expensive homes first. Those houses might be a little out of your price range, but the agent is hoping you will fall in love and buy the house regardless. A good real estate agent will work to find what you want in your price range, or at least be honest if your expectations are too high.
Compare Homes: Since almost any house can seem like an upgrade from an apartment, it is easy for a first-time homebuyer to want the first house they see. This is a big mistake. Compare, compare, compare. If your agent or the seller's agent tells you there are multiple bids on the house, it could be a tactic to get you to buy, or it could be legitimate. Talk to your agent about the consequences of making an offer. Your initial offer is never set in stone, but make sure your agent is clear about the window of time for backing out. If you are going to make an offer on a home, visit it more than once, at different times of day if possible. Even simply driving by the house at night might give you a different perspective on the neighborhood. Be sure to take pictures inside the house so that you have a reference when those nagging questions come up.
It is still a buyers market. There is an increasing amount of affordable homes out there just waiting for first-time buyers. Do your homework and make your decision with confidence. Following the tips above is a great start. The right home can be the investment of a lifetime. - 31387
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