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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
Which type of loan fits your particular needs? If this
will be your first home or a "transitional home" -- one you plan to
own for a short time, an ARM may be the best type of loan. If it's going to
be your dream home or one you plan to raise a family in, then you may want
the stability of a fixed rate mortgage. If you choose an ARM, the index
should be based on the Cost of Funds Index if rates are increasing, and
Treasury Bills if they are decreasing. The COFI's are less volatile over time
than T-Bills; make sure the teaser rate is understood and what the real rate
would be.
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.
Tip #6: Sign A Contract That Protects You
Make sure that the contract you put on a house allows you
to arrange financing, inspect the home and negotiate any problems that you
uncover. Ensuring that the contract you sign will minimize potential legal
battles will let you swim in your new pool with your family and neighbors
instead of with the sharks.
Tip #7: Put Yourself In The Seller's Shoes
You are about to make one of the most important decisions
that will affect both your life and the life of the seller. If you take time
to understand the reasons the seller bought the home, their reasons for
selling, and the home improvements they have or have not made, you'll be in a
better position to evaluate the home and negotiate a better deal. In the end,
the home buying process excludes the professionals and comes down to the
individuals buying and selling the home. A closer look at the seller may help
you in deciding whether and for how much to buy a particular home.
Tip #8: Develop A Mortgage Shopping Chart
One of the biggest decisions to make before putting a
contract on a home is how to finance the purchase. There are 10,000 lenders
competing for your mortgage business. The days of simply walking into the
community bank and negotiating with the loan department manager are over.
Today, you can apply for a loan over the Internet or even use a mortgage
broker to shop for your loan with hundreds of lenders. When choosing a
lender, you want to avoid apples to oranges contrasts by comparing fixed
rates to fixed rates, not fixed to ARM's. Create a chart that lists different
types of loans, fees, and at least five mortgage providers (including a
mortgage broker).
Tip #9: Get A Quality Home Inspection
Although it is hard to believe, more people pay for
inspections before buying used cars than when making the biggest investment
of their lives - their homes. Paying for a qualified home inspection before
you buy a home isn't just spending "a little extra" for peace of
mind; it's absolutely essential for anyone who doesn't want to spend
thousands of dollars for repairs.
Tip#10: Peace Of Mind: Home Protection
Plans
To protect both you as a buyer, as well as the seller, it
is a good idea to purchase a home protection plan. What exactly is
it? A home warranty, or home protection plan, is a service contract,
normally for one year, which protects homeowners against the cost of
unexpected repairs or replacement of their major systems and appliances that
break down due to normal wear and tear. A negotiable contract between
the buyers and sellers which does not overlap or replace homeowner's
insurance policy, this type of warranty can save the new homeowner lots of
headaches, as well as put seller's fears to rest. The warranty covers
mechanical breakdowns, while insurance typically repairs the related damage.
For example: if a hot water heater burst and destroyed a wall in your home,
the warranty would repair the water heater and your insurance would pay to
fix the wall.
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