With falling home prices and near-record low mortgage rates, now really is a good time to buy. First and foremost, buyers need to make sure that they have solid job security before deciding to buy a home. Job security is probably the number-one consideration that people should have when purchasing a home. Buyers that feel comfortable enough about their income are in a great position to take advantage of some very attractive real estate deals.
Now more than ever it is important for potential buyers to use an experienced real estate professional. There is very little downside and a lot of upside to getting a professional working on your behalf to help you find the right house. Foreclosures and short sales, an increasing large portion of the current market can involve legal and other hassles often best handled by an experienced professional. Look for an exclusive buyer agent who will have your interests at heart and can help you with strategies during the bidding process. Remember, sales commissions are paid by the seller, so there is no cost to the buyer to have their own representation.
Start by shoring up your credit. Since you most likely will need to get a mortgage to buy a house, make sure your credit history is as clean as possible. Get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.
Aim for a home you can afford. The rule of thumb is that you should buy a house that will cost about two-and-one-half times your annual salary. There are many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford. If you have a home to sell, wait to look for your next home until you have a contract on your current home. That way you will know exactly how much you have to spend on your new home.
Before house hunting, get pre-approved. Getting pre-approved will put you in a better position to make a serious offer when you do find the right house. Pre-approval from a lender is based on your actual income, debt and credit history and is a fairly simple process.
Use a knowledgeable reputable mortgage lender. Be sure to select a reputable lender that will work with you to get the best deal possible. Look for a lender who will put all costs in writing, carefully explain loan options, encourage you to ask questions, and not rush you into a quick decision.
6% is a good rate. With all the headlines about 30-year mortgage rates dipping below 5 percent, many consumers believe they’ll be able to lock in a rate in the high 4’s. But with today’s tighter lending standards, many borrowers won’t qualify for the most attractive rates. Keep in mind, trends of 30-year, fixed-mortgage rates over the past few decades, it’s clear that any rate that starts with a 6 is still very attractive. If you qualify, there are many lenders that offer low-interest mortgages that require a down payment as small as 3 percent of the purchase price.
Choose carefully between points and rate. When selecting a mortgage, you typically 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, five or more year, it’s usually a better deal to pay the points if possible. The lower interest rate will save you more in the long run.
Don’t buy if you plan to live in the home short term. Purchasing a home in today’s market only makes sense if the buyer plans to live in the home for at least three to five years. Those who plan on selling the property sooner might not provide the property enough time to recover the costs of buying and selling and any lost value that may have occurred in the short term. Even if a home declines in value over a short term, it can still be a good investment if you give the market enough time to recover.
Before making an offer on a home examine the selling prices of similar, nearby properties. Make sure the sales information is fresh because the market is constantly changing. For an accurate gauge of home prices in a given market, buyers should look for comparable sales data that is as recent as possible. Your opening bid should be based on the sales trend of similar homes in the neighborhood.