1. What’s your credit score?
It’s best to examine your credit a few months before you need or want to buy a home if you plan on getting a mortgage. Get a copy of your credit report. Make sure the facts are correct, and fix any problems you discover. Besides your credit record itself, you need to figure out what percentage of your total income are your debts. A mortgage company will use this debt ratio to see if you can afford a home.
2. How much can you can really afford to spend on a mortgage, taxes and homeowners insurance?
My mother (who was terrific when it came to finances, always said that a good rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. Before you take this as gospel, call a lender and see what they say they will give you for a mortgage.
3. Do you plan to live in that area for awhile?
Even with a super deal on a home, if you’re not going to be in that area for awhile, you might want to think twice about buying a home – unless it’s a fixer-upper that you plant o fix up and resell. Once you figure out the settlement costs for both buying and re-selling a home, you may end up losing money if you sell any sooner – even in a rising market. When prices are falling, it’s an even worse proposition. It’s best to sit down with an expert before you start to shop around.
4. Think you don’t have enough money to put down on a home?.
There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3 or 3.5 percent of the purchase price. The most popular is a FHA loan, which may also allow the seller to contribute to the closing costs, but there are also special programs you may qualify for based on occupation or the home’s location or your finances.
5. What’s better – a lower interest rate with points or no points and a higher interest rate?
You usually have the option of paying down points — a portion of the interest that you pay at closing — in exchange for a lower interest rate. If you stay in the house for a long time — say three to five years or more — it’s usually a better deal to take the points. The higher one time closing costs but the lower interest rate will save you more in the long run.
6. Hire an expert.
Would you represent yourself in court? If you have a complex tax situation, would you do your tax return yourself? Even though, in both of these cases, the internet contains TONS of information and advice on these subjects, you’d probably hire a lawyer or a tax preparer. These experts stay on top of changing laws to help you make the most out of the situation. So even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Hire a buyer’s agent. These agents represent you, instead of the seller and will have your interests at heart. They will help you with strategies during the negotiation process and then handle the paperwork and coordination from the time you put in an offer until you actually close on the home. Many issues come up during this time and it’s best left to the experts to resolve them so that you can have a smooth closing process.
7. Buy in a district with good schools.
In most areas, this advice applies even if you don’t have school-age children. Reason: When it comes time to sell, you’ll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values. But be aware, usually these top schools also have the highest tax mileage rate.
8. When you are ready to start house hunting, get pre-approved.
Getting pre-approved will you save yourself the grief of looking at houses you can’t afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with 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. The lender will probably provide some sort of documentation to you or your agent showing their willingness to provide you with a mortgage and for how much.
9. What should your offer be?
Your offer should be based on the sales of similar homes in the neighborhood and not what the seller paid for the home previously. So have your agent talk to you about the sales of similar homes in the last three or six months. Consider the home’s conditions when you compare the selling price of similar homes. Throw into the thought process what you are asking of the seller. Are you asking for assistance in the closing costs? Are you asking for repairs? Are you asking for them to wait for your house to be sold? The seller and their agent will be considering the entire offer, not just the amount. Sometimes, the terms and conditions will get your offer accepted over a higher offer. It just depends on what the seller’s motivations are.
10. Get a home and maybe some other inspections.
Your lender will require a home appraisal anyway, but that’s just the bank’s way of determining whether the house is worth the price you’ve agreed to pay. If it’s a FHA mortgage, a few items will be looked at for safety. That won’t tell you the heater is on it’s last legs or you will need to start saving for a new roof in the next few years. It also won’t tell you that the radon level is high. You should hire your own inspections. Again, rely on your buyer’s agent to make recommendations of the company and the types of inspections that you should get.