Buying a first home is often an overwhelming endeavor. Consumers get the feeling that their financial situation is rapidly getting out of control. Buying real estate is something most people have very little experience with or knowledge about.
However, buying a home can be a simple and orderly process when you break it down to the basics. The following steps can help. 1. You need to get preapproved for a mortgage prior to looking at any homes.
This gives you the maximum possible time to understand all the complicated paperwork and terms of your mortgage. Preapproval also shows the seller that you are a serious qualified buyer. This gives you an edge in negotiations. Particularly when competing with other buyers for the best deals. Preapproval for your mortgage will also give you time to solve any approval problems.
This can prevent wasting time looking and falling in love with homes before you are able to buy. 2. Watch out for any prepayment penalty which might be included in the loan proposals you are given by your loan originator. Accepting a prepayment penalty may cause you to pay many thousands extra if you need to sell or refinance the home during the first two to three years. Even with credit problems, you can find many loan programs which do not include a prepayment penalty. If your mortgage banker proposes a loan which has a prepayment penalty, you should most likely turn it down and continue your loan search.
One caveat here, though. If your credit is bad enough that you will have no chance of qualifying for a different loan for a couple of years, you might consider accepting a "soft" prepayment penalty. This penalty would only apply if you refinance the loan and not if you sell the property. 3. As the interest rate markets change over the next year or so, you should also be on the lookout for good adjustable rate mortgages. I know that you have heard many horror stories about adjustable rate mortgages, but there are some that have strict adjustment limits and easy refinancing terms and could save you thousands over a couple of years.
An example of a good ARM would be an FHA adjustable rate mortgage. FHA ARM mortgages have strict adjustment limits, no negative amortization (your loan balance only goes down and never up), and a streamlined refinance process. 4. Before buying a home, make certain you know how much you can comfortably afford.
Review the details of your family budget and determine how much you are realistically very comfortable paying on a home. If you already an efficient financial manager, this will be a quick process. It will surely take much longer if your finances are disorganized, but the effort will prove very rewarding. Your finances should be in order before buying a home anyway. At any rate, you should never rely on your loan officer and real estate agent to tell you how much qualify for.
It is very easy for them to get you approved for a home you cannot comfortably afford. Both get paid more when you buy a higher priced home. However, they will not be there to help you make the payments later. 5. Once you have your finances in order, the first thing that you should do is to familiarize yourself with home prices in the area in which you want to live. Do not make a great effort to match yourself up with a home at this time.
Check prices in the area online so that you know what people are asking for homes, but then be sure to check for foreclosed homes to take advantage of today's difficult housing market. It is a buyer's real estate market. For your first home, you are better off choosing a home for investment value than trying to get the perfect dream house. You want to buy a home for at least 10% to 20% less than similar homes which have sold. This way you are primed to take advantage of buying in a down market with little risk and making out like a bandit a couple of years later when you are ready to move up. Don't expect to pay full market value for a home even when prices are depressed and then benefit from inflation to build your equity.
The other homes you will want to buy will be going up too. You make your money when you buy at the right price. The tips listed above are just few of many basic strategies to help buy your first home. Educate yourself before entering the market.
Most first time home buyers begin from a position of weakness by not getting a home buying education before looking at homes. Many of those buyers are now paying the price for that failure as today's mortgage crisis works itself out. Don't let the mistakes of others scare you away from buying a home. Learn the basics and you can still control your destiny.
Before buying a home, make sure you get Brenda Puckett's free reports on getting the best mortgage rate and get the best deal buying a home in the real estate market today