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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. Home buyers 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 -- for example,
because of a circular stairwell -- that doesn't meet your fundamental
requirements. 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. 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.
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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 yourself as a
buyer, and 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 on
their major systems and appliances that break down due to normal wear
and tear. A negotiable contract between the buyers and sellers
which do 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.
Information provided by The American Homeowners Association, Copyright©
2003
Huntington Harbour Real Estate services for buying and selling offered by the Century21
realtors below
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