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
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.