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10 Tips to Successful Home Buying
Tip
#1: Research Is The
Key To Discovery
Home
sellers won't call you with an offer to buy a maintenance-free home
with a wonderful mortgage. You have to find the gems yourself! Only
by reading available materials, talking
to friends and experts, and spending
time looking at different homes, schools, and neighborhoods
will you end up with your American dream. Avoid the nightmares by
learning how best to buy and maintain a home.
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.
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©
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