This is the biggest investment you will make. You will make many decisions and need good advice from a real estate professional. When buying a home, you can learn from the knowledge and skill of a Real Estate Agent.
Tip #1: Research Is The Key
Sellers won't call you and offer to sell a maintenance-free home with a wonderful mortgage. By reading available materials, talking to friends and experts, and spending time looking at different homes, schools, and neighborhoods will you end up with your dream home.
Tip #2: Plan Ahead And Get Pre-Qualified
Developing a plan can help you focus on the important factors and get organized . You may even want to use a binder with sections on house hunting, home financing, service providers, etc. Loan pre-qualifying helps you determine the home price you can afford and presents you as a genuine prospect to the seller. A lender typically uses the 28% formula (your monthly mortgage can't exceed 28% of your monthly income) in approving your loan. A plan will save both time and money!
Tip #3: Value, Value, Value
Home values have growth but you must guard against the possibilities of falling prices, skyrocketing ARM rates and corporate layoffs that can dramatically affect your home values. The classic rule of buying the worst house in the best neighborhood still applies. If you buy with an eye towards improvement, you can customize the home to fit your needs. The saying, "make money buying a home, not selling one," should keep you focused on the long-term importance of the purchasing price.
Tip #4: Create A Top 10 List Of Things You Want
List the features (fireplace, fenced-in yard, new appliances, etc.) that are most important to you in deciding on which home to buy. Establishing "your criteria" will save time and may keep you from buying a home you did not really want .
Tip #5: Fixed vs. Adjustable Rate Mortgages
If this will be your first home or a " temporary home" -- an ARM may be the best type of loan. If it's going to be your one and only home or one you plan to raise a family in, then you may want the stability of a fixed rate mortgage. If you choose an ARM, the index should be based on the Cost of Funds Index if rates are increasing, and Treasury Bills if they are decreasing. The COFI's are less volatile over time than T-Bills; make sure the teaser rate is understood and what the real rate would be. Whichever loan you choose; make sure that you scrutinize all the closing costs. If you are required to have a mortgage escrow account and private mortgage insurance, make sure you understand the terms and cancellation procedures (your Real Estate Agent has publications to assist you). Also, make sure there are no prepayment penalties so that you can utilize an accelerated mortgage plan. A good mortgage reduction plan can save you tens of thousands in interest costs, and shorten your loan term, with only small extra principal payments. If you experience negative changes in your job, health, or marital status, you can revert to the standard payments in your mortgage contract.
Tip #6: Sign The Contract That Protects You
Make sure that the contract allows you to arrange financing, inspect the home and negotiate any problems that you uncover. Ensure that the contract will minimize legal battles.
Tip #7: Put Yourself In The Seller's Shoes
Understand the reasons the seller bought the home, their reasons for selling, and the home improvements they have or have not made . This will put you in a better position to evaluate the home and negotiate a better deal. A closer look at the seller may help you in deciding if you want to buy and for how much to pay.
Tip #8: Develop A Mortgage Shopping Chart
There are 10,000 lenders competing for your mortgage business. Today, you can apply for a loan over the Internet or even use a mortgage broker to shop for your loan with hundreds of lenders. When choosing a lender, you want to avoid apples to oranges contrasts by comparing fixed rates to fixed rates, not fixed to ARMs. Create a chart that lists different types of loans, fees, and at least five mortgage providers (including a mortgage broker).
Tip #9: Get A Quality Home Inspection
Paying for a qualified home inspection before you buy a home isn't just spending "a little extra" for peace of mind; it's absolutely essential for anyone who doesn't want to spend thousands of dollars for repairs.
Tip#10: Peace Of Mind: Home Protection Plans
A home warranty, or home protection plan, is a service contract, normally for one year, which protects homeowners against the cost of unexpected repairs or replacement of their major systems and appliances that break down due to normal wear and tear. A negotiable contract between the buyers and sellers which does not overlap or replace homeowner's insurance policy, this type of warranty can save the new homeowner lots of headaches, as well as put seller's fears to rest. The warranty covers mechanical breakdowns, while insurance typically repairs the related damage. For example: if a hot water heater burst and destroyed a wall in your home, the warranty would repair the water heater and your insurance would pay to fix the wall.