Doing simple things like getting pre-approved are especially important to take down that “for sale” sign on your new home. The last few years in the real estate industry show, people forget about the financial responsibility of purchasing a home. Here are a few tips for dealing with the dollar signs of your transaction.
Sub-primes may be history, but you’ll probably still be shown homes you can’t actually afford. By getting pre-approved as a buyer, you can save yourself the grief of looking at houses you can’t afford. You can also put yourself in a better position to make a serious offer when you do find the right house. Unlike pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head.
Most of all, this is very important in our current real estate market. The last thing you want to do is waste time in houses you do not qualify for. Houses on average are selling faster than ever before. This means there is a good chance your offer will be time sensitive.
Choose your mortgage carefully.
Used to be the emphasis when it came to mortgages was on paying them off as soon as possible. Today, the debt the average person will accumulate due to credit cards, student loans, etc. means to consider wisely. It is 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 an additional principal when money is good. Additionally, when picking a mortgage, you usually have the option of paying additional points (a portion of the interest that you pay at closing) in exchange for a lower interest rate. If you plan to stay in the house for a long time—and given the current real estate market, you should—taking the points will save you money.
Do your homework before bidding
Before you make a financial offer on a home, do some research on the sales trends of similar homes in the neighborhood with sites like Zillow. Consider especially sales of similar homes in the last three months. For instance, if homes have recently sold for 5 percent less than the asking price, your opening bid should probably be about 8 to 10 percent lower than what the seller is asking. With homework like this, you will be thankful you did not waste time getting pre-approved.
Consequently, you can see that lots of these tips are dependent on your own situation. The real estate market, where you stand financially, all play a huge factor. This is not a one size fits all article, this is why we consider talking to your real estate agent and lender to get the best information possible!