As the events of the last few years in the real estate industry show, peopleforget about the tremendous financial responsibility of purchasing a home attheir peril. Here are a few tips for dealing with the dollar signs so that youcan take down that “for sale” sign on your new home.
Get pre-approved. Sub-primes may be history, but you’llprobably still be shown homes you can’t actually afford. By gettingpre-approved as a buyer, you can save yourself the grief of looking at housesyou can’t afford. You can also put yourself in a better position to make aserious offer when you do find the right house. Unlike pre-qualification, whichis based on a cursory review of your finances, pre-approval from a lender isbased on your actual income, debt and credit history. By doing a thoroughanalysis of your actual spending power, you’ll be less likely to get in overyour head.
Choose your mortgage carefully.Used to be the emphasis whenit came to mortgages was on paying them off as soon as possible. Today, thedebt the average person will accumulate due to credit cards, student loans,etc. means it’s better to opt for the 30-year mortgage instead of the 15-year.This way, you have a lower monthly payment, with the option of paying anadditional principal when money is good. Additionally, when picking a mortgage,you usually have the option of paying additional points (a portion of theinterest that you pay at closing) in exchange for a lower interest rate. If youplan to stay in the house for a long time—and given the current real estatemarket, you should—taking the points will save you money.
Do your homework before bidding. Before you make an offeron a home, do some research on the sales trends of similar homes in theneighborhood with sites like Zillow. Consider especially sales of similar homesin the last three months. For instance, if homes have recently sold for 5percent less than the asking price, your opening bid should probably be about 8to 10 percent lower than what the seller is asking.