Top 10 Tips to Successful Home Buying
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 gems yourself! Only 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 American dream. Avoid the nightmares by learning how best to buy and maintain a 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 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. 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. Homebuyers in the 1970's benefited tremendously from what seemed like ever appreciating home prices. Nowadays, you're looking at slow growth while guarding 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 Amenities
When shopping for a home, 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" early on will save time shopping for inappropriate homes and may keep you from buying a home on a whim. As detailed 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 Rate Mortgages
Adjustable rate mortgages have an initial fixed rate, which is followed by a period of adjustment intervals 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 of 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 by 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 (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.
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