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.
Strengthen
your credit score.
Since
the real estate bubble burst a few years ago, lenders have tightened their
requirements when it comes to borrowers’ credit scores. The basics, however,
remain unchanged: The higher your credit score is, the lower your down payment
and monthly payments will be. To bolster your numbers, settle any outstanding
debts and refrain from applying for new credit for several months prior to
buying.
Secure
your savings.
Savings
are obviously important for a down payment, but they have other benefits as
well. A homebuyer with three to five months' worth of mortgage payments set
aside is a much better loan candidate, and lenders will often give you a little
more latitude on other factors if you can show that you have an ample cushion.
A healthy savings account can also act as insurance against unforeseen problems
or repairs.
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
finding your dream house, only to find you don’t make the cut financially. You
can also put yourself in a better position to make a serious offer when you do
find the right house. By doing a thorough analysis of your actual spending
power, you’ll be less likely to get in over your head.
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.
Follow
these tips and work with an experienced real estate professional, and you’ll go
far in ensuring that you get the best deal and the best mortgage on your first
home.
