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.
Sub-primes
may be history, but you’ll probably still be shown homes you can’t actually
afford. 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 a better
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’s better to opt 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.
Do
your homework before bidding.
Before
you make an offer on a home, do some research on the sales trends of similar
homes in the neighborhood with sites like Zillow. Consider especially sales of
similar homes in the last three 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.
