- August 22, 2019
So You Think You’re Ready to Buy Your First House?
You should get pre-approved for your mortgage before you start looking at houses.
Yes, most definitely. Knowing how much the bank is willing to lend you will make the home-buying process easier and help you set realistic goals. A realtor is more likely to want to work with you knowing that you're serious and ready to make an offer as soon as you find the home you want. Also, some sellers only allow real estate agents to show their house if someone has a pre-approved letter.
Before you apply for a mortgage, it is best to open up some new credit cards to boost your credit rating.
Applying for new credit cards is probably one of the worst things you can do. It can affect your credit score and your debt-to-income ratio, two of the main things lenders look at. This can result in you paying a higher interest rate, delaying your mortgage or even being completely denied. The best thing for your credit score? Make regular payments on time.
The purchase price of your home should be as close as possible to the mortgage amount that you have been approved for.
You could be setting yourself up for trouble. Just because the bank approves you for a $300,000 mortgage doesn't mean you can afford to make that payment every month. You must factor in property insurance, taxes, homeowners' association dues, maintenance and utility bills. And many of these expenses will increase every year, so even if you can afford them now, you may not be able to afford them in a few years. Make sure to leave yourself plenty of cushion, especially if you're thinking of expanding your family.
Your monthly mortgage payment should not exceed 28% of your monthly pre-tax income. That payment includes principle, interest, taxes and insurance (PITI).
That's the formula that most mortgage lenders will use to determine how much they're going to lend you.
The terms "buyers' market" and "sellers' market" are determined by the average number of days that area houses are on the market.
that's how it works. If homes in your area routinely sell within a week or two, you're in a seller's market. If they stay on the market for 60 days or more, that's a buyer's market. The longer homes stay on the market, the less power sellers have in that market, giving you more leverage. Check the Average Number of Days on the Market (DOM) in the area you're searching; different neighborhoods in the same town or towns in the same metro area can have drastically different DOM averages.
An adjustable-rate mortgage (ARM) is a good option if you plan on selling the home in a few years.
if you know for certain you're not going to be staying in the home long term or you'll be able to pay off the loan in a few years, an ARM will save you money. Interest rates for ARMs can be a whole percentage point lower than fixed-rate mortgages (FRM). A brief explanation of each type of mortgage: ARMs give you a set interest rate for the first few years – usually five to seven years – then the rate will adjust to the current levels. With a FRM you're paying the same interest rate throughout the life of the loan. With either type of loan, do your research and make sure you understand all the terms and conditions.
Most all lenders require a title clearance before the closing.
Your lender wants to make sure no one else can make a claim on the property. The title company (or title insurance company) will check the property's title history and look for liens or any other obstacles to the sale. Once the title is deemed legally "free and clear," they'll likely offer you insurance as reassurance of a clear transfer of the home.
If you're buying a new home or one that's just a few years old, you can skip getting a home inspection.
that's a big mistake! Every house should be inspected, otherwise you're relying on the seller to be honest and tell you everything that's wrong with the house, and there maybe problems they're unaware of too. If the inspector does find anything wrong, use it as a bargaining chip. Ask the seller to correct the defects or ask for money to make the repairs yourself. Builders have been known to cut corners on new construction just to get the home on the market as quick as possible, so if buying a new home, double and triple check the builder's reputation.
Some of your closing costs are tax deductible.
Loan origination and discount "points" are 100 percent deductible for the year in which you purchase your home. Consult with your tax professional and mortgage lender before you close escrow to get the biggest deduction. Also, some states and towns offer tax incentives for buyers who purchase vacant, foreclosed properties or properties in specific redevelopment districts. Also, check to see if your municipality offers tax breaks for installing energy-conserving or green features, like solar panels, tankless water heaters and dual-paned windows.
Once you have your heart set on a house, it's okay to contact the seller directly and skip the realtors.
that's big no-no! Let the pros do their job. Always have your real estate agent communicate your request or concern to the seller's agent. Likewise, if the seller gets in touch with you directly, tell them to talk the agent(s). Mastering real estate and legal terminology can be tricky, some seemingly innocent and minor changes to your agreement might create problems with your lender.
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