As the events of the last few years in the real estate industry show, people forget about the tremendous financial responsibility of purchasing a home at their peril. Here are a few tips for dealing with the dollar signs so that you can take down that “for sale” sign on your new home.
Get pre-approved. ***Sellers will not take any offers seriously with some proof of funds, either a pre-approval letter, or a bank statement if you have cash. THIS MUST BE YOUR FIRST STEP, or you will, in the end, just be wasting your own time. By getting pre-approved as a buyer, you can save yourself the grief of looking at houses you can’t afford. You can also put yourself in the best position to make a serious offer when you do find the right house. Unlike 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. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head.
Choose your mortgage carefully. Used to be the emphasis when it came to mortgages was on paying them off as soon as possible. Today, the debt the average person will accumulate due to credit cards, student loans, etc. means it can all be better managed by opting for the 30-year mortgage instead of the 15-year. This way, you have a lower monthly payment, with the option of paying an additional principal when money is good. Additionally, when picking a mortgage, you usually 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—and given the current real estate market, you should—taking the points will save you money. There are also downpayment assistance programs, grants and FHA loans for lower downpayment options, which can have higher payments as well, but at least a portion of your payments are going towards some sort of equity and not just flatly wasted on rent. Besides, property values have been at a pretty steady appreciation here in the Omaha metro for the last several years.
Do your homework before bidding. Before you make an offer on a home, discuss sales trends on similar home with your protector. Consider especially sales of similar homes in the last 3-6 months. For instance, if homes have recently sold for 5 percent less than the asking price, your opening bid should probably be about 8 to 10 percent lower than what the seller is asking. But ultimately, the best plan for price offerings and all other financial moves should be discussed with your protector to best weigh your options so that you can make the most educated decision.