Top 10 Tips to Successful Home Buying
Tip#1: Research is the Key to Discovery
Home sellers won’t call you with an offer to buy a maintenance free home with a wonderful mortgage. You have to find the gem yourself! Only by reading available materials, talking to friends and experts, and spending time looking at different homes, schools, neighborhoods will you end up with your American Dream. Avoid the nightmares by learning how best to buy and maintain your home.
Tip #2: Make a Plan and Get Pre-Qualified
Every important decision needs to be clearly thought out. Developing a home buying plan can help you focus on the important factors and organize the entire process. You may even want to use a binder with sections on house hunting, home finance, 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. Planning your actions and getting pre-qualified will keep you out of the panic mode and allow you to take advantage of opportunities. A thorough plan will save both time and money!
Tip #3: Value, Value, Value
The days of 10-30% annual appreciation have passed. Home buyers in 2012 and 2013 benefited tremendously from what seemed like ever appreciating home values. Moving forward, we are looking at slow, steady growth while guarding against the possibilities of falling prices. The classic approach 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 Amenities
When shopping for a home, list the features (fireplace, updated kitchen, pool, etc.) that are most important to you in deciding which home to buy. Establishing “your criteria” early on will save time shopping for inappropriate homes and may keep you from buying a home on a whim. As details in Tip #3, your top reason for buying a home should be the value you are getting. Some of your top 10 amenities should logically be sacrificed if an incredible value is available.
Tip #5: Fixed vs. Adjustable Mortgages
Adjustable rate mortgages have an initial fixed rate, which is followed by a period of adjustment interval during which the rate adjusts based on the performance of several key indexes. Typically the initial fixed rate on an ARM is slightly lower than the comparable rate on a fixed rate mortgage.
Fixed rate mortgages allow buyers to take out a long term loan without having to worry about changing interest rates or monthly payments. Most fixed rate loans are offered in either 15 or 30 year terms.
Most buyers will be well served using a fixed rate loan, but each situation is unique. While ARM loans have become less popular in recent years, they can still be a viable option for some buyers – especially those who plan on selling again in the short term.
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.
Tip #6: Sign a Contract that Protects You
Make sure that the contract you put on a house allows you to arrange proper financing, time to inspect the house and negotiate any problems that you uncover. Ensuring that the contract you sign will minimize potential legal battles will let you swim in your new pool with your family and friends instead of with the sharks.
Tip #7: Put Yourself in the Seller’s Shoes
You are about to make one of the most important decisions that will affect both your life and the life of the seller. If you take time to understand the reasons the seller bought the home, their reasons for selling, and the home improvements they have or have not made, you’ll be in a better position to evaluate the home and negotiate a better deal. In the end, the house buying process excludes the professionals and comes down to the individuals buying and selling the home. A closer look at the seller may help you in deciding whether and for how much to buy a particular home.
Tip #8: Develop a Mortgage Shopping Cart
One of the biggest decisions to make before putting a contract on a home is how to finance the purchase. There are 10,000 lenders competing for your mortgage business. The days of simply walking into your community bank and negotiating with the loan department manager are over.
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 rates to ARM’s. Create a chart that lists different types of loans, fees, and at least five mortgage providers. (Include a mortgage broker).
While numbers are most important, pay attention to how the lender answers your questions, do they return calls quickly, and do they have years of experience? My experience is most lenders have very similar fees, so also look at the overall experience.
Tip #9: Get a Quality Home Inspection
Although it is hard to believe, more people pay for inspections before buying used cars than they do when making the biggest investment of their lives – their homes! 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 Plan
To protect both you as a buyer, as well as the seller, it is a good idea to purchase a home protection plan. What exactly is it? A home warranty, or home protection plan, is a service contract, normally for one year, which protects homeowners against the cost 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 at ease. 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 the insurance would pay to fix the wall.
For a list of recommended Home Inspection Companies, contact Scott Cary today!