Also most first-time buyers are renters. The best time to close on a
house is when your current lease ends. Don't sign another year-long
lease if you expect to buy a home before that lease period expires;
otherwise you'll end up with a dent in your pocketbook from writing rent
and mortgage checks. If you can't time your closing correctly, approach
your landlord about a shorter lease — say, three to six months in
length. One alternative is a month-to-month lease. Or you can ask your
landlord to include an escape clause in your new lease that will allow
you to get out of your lease with 30 or 60 days' notice.
 Take
time to research!
This is one of the most important financial decisions that you and your
family will make. Next to buying a new car or sending your kids to
college your mortgage could be with you for sometimes up to 30
years. Research the neighborhood, research the rates, research
various lenders and brokers- RESEARCH!!!
Remember buying a house
covers many areas and has legal, financial and emotional considerations
to think about. It's good to learn from the mistakes other home buyers
have made so that you won't find yourself being disappointed and
spending $1,000's on the wrong house.
There are far too many variables--type of mortgage, term, lender and
amount of points to mention a few--not to investigate all of your
options. Don't simply accept the first plan presented to you, whether it
is from a mortgage broker, an Agent or on the recommendation of a friend
or relative. Spend time comparing to get the most advantageous plan for
your requirements and financial situation. Don't get me wrong, owning a
home can be a great and rewarding
experience. Take the time needed to make the best and wisest decision. I
know you'll be glad you did!
Wait
for the "right" home!
Many first time buyers make the mistake that they will, if they look
around long enough, find a home that has a full 100% of their needs and
wants. With the thousands of variables available in housing, including
location, style, size, amenities and condition, this is almost always an
unrealistic goal. There are two potential problems with this strategy:
First, these buyers pass by homes that meet 90% or more of their
requirements only to eventually give up (often purchasing homes with
less of their requirements because they are worn out!) and second, while
they are waiting for the "perfect" home, housing market prices
(and often mortgage rates) continue to rise, adding expense to their
purchase. Instead, it makes sense to determine the most important of
your needs and the most desired of your wants and selecting a home that
meets the majority of them.
Buying in a neighborhood you know nothing about.
I've already touched on this but again it is a very important factor to
think about. Sometimes first-time buyers will fall in love with a house in a
neighborhood that is inappropriate for them. Even though you'll live in
the house, you'll have to travel through the neighborhood to get there. Is
it a nice neighborhood? Is there graffiti on every wall? Are there gangs?
Is there a neighborhood crime watch group? Are the neighbors your age? Are
there families around the same age as yours? Is it a transient
neighborhood, or do families stay there forever?
To avoid making this mistake, spend a lot of time
in the neighborhood before you buy. Drive to and from the house. Sit in
your car and watch your future neighbors come home from work. Listen to
how loudly their children play their favorite rock music. Walk to the
local bar, restaurant, grocery store, and cleaners. Think about whether or
not this neighborhood will make you as happy as the house.
Buying a property that's difficult to resell.
Although you say you don't mind that the house sits next to the local
railroad, you will when it comes time to sell the home. And it's unlikely
you'll be able to easily convince another buyer just how quiet and
peaceful life is there. When buying a home, try not to buy one that will
be difficult to resell because even though you think you'll be there
forever, you won't. Most first-time buyers sell within five to seven
years. Think hard about how you would sell this home before you buy it.
Walk yourself through and point out all the negatives.
Over-buying
the first time. . .
Being
"house poor" is a very uncomfortable existence. A large and
beautiful home with little or no furniture tends to be empty and cold. A
life where almost every dime of your earnings goes to the support of
your house wears thin very quickly and is a frequent cause of family
stress. Pushing yourself right up to--or beyond--your limits leaves you
highly exposed when the inevitable changes to the national or your
personal economy occur. Leave yourself some breathing room!
Don't
take shortcuts with
the inspection process.
This can involve skipping a whole house inspection completely in order
to save the relatively small amount of money involved or it may involve
using a friend or relative with limited experience to conduct the
inspection. In either case you run the risk of not exposing potentially
expensive--or even hazardous--defects in the property. Protect yourself
and invest the $200 to $500 for a professional inspection.
Okay
I'm ready. How
much of a down payment do I start with?
One of the first
questions that almost every first time home buyer asks is, "how much
of a down payment am I going to need to start with?" Since
every case is different there is no correct standard answer. Down
payments will vary from 0% (with a VA--Veteran's Administration loan) to
upwards of 25% (with certain "non-conforming" loans). On an
average, most home buyers make down payments in the 5%-15% range,
although your own personal situation may dictate more or less down
payment. When you are factoring money for a down payment, don't forget
about closing costs, which will total in the 2-5% range, payable in cash
at the time of closing.
Don't
overextend your budget.
Although the
lender who pre-qualifies you for your loan tells you you're able to afford
a $350,000 home, buying in that price range may stretch your budget beyond
the comfort zone. To avoid feeling pinched, it's important to understand
how you spend your money. You may be comfortable spending 35 percent of
your take-home pay on rent, or you may prefer to spend less — say, 25
percent.
Write down everything you spend (down to that
last piece of bubble gum) for two months. Can you live without buying your
favorite group's latest CD? Would you feel uncomfortable knowing you can
go out to dinner only once a month? That you must eliminate your yearly
vacation? That your children can't have camp or piano lessons and so on .
. .
Don't
choose the wrong mortgage.
Many
first-time buyers have heard from their parents that the only mortgage to
get is a 30-year fixed interest rate loan. That's because the generation
ahead of you didn't have the tailor-made financial options buyers have
today. Consider choosing an adjustable-rate mortgage
(ARM) to take advantage of super-low interest rates. Or pick a 10- or
15-year fixed interest rate loan to maximize your deduction, and save you
hundreds of thousands of dollars in interest. Or you might want to look
into a two-step mortgage, which combines a little of the risk of an ARM
with the dependability of a fixed-rate loan. Explore all the options. Have your lender show
you on paper how much they'll cost you and how they compare with each
other.
What
is Pre-qualification? Does it mean that the loan is approved?
Pre-qualification is the initial step in securing a mortgage. A lender will analyze your
current income, debt and basic credit history situation in order to
qualify you for a maximum loan amount. This gives you a clear picture of
your financial parameters and a maximum housing price (the mortgage
amount plus your down payment). With pre-approval, the lender verifies
your income, debt and financial picture, approving the loan subject to a
favorable appraisal of the property you select.
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