Dealing with Financing – Be prepared !
As the events of the last few years in the real estate industry show, people forget about the tremendous financial responsibility of purchasing a home at their peril. Here are a few tips for dealing with the dollar signs so that you can move into your new home.
Get pre-approved. Getting pre-approved is esssential. 1.You can save yourself (and your Realtor the grief of looking at houses you can’t afford. 2. By getting pre-approved, 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.
Choose your mortgage carefully. Shop around. It’s not just the interest rate that could be different lender to lender, but also the closing costs. Make sure to compare apples to apples (maybe even make your own spreadsheet). When considering 15 or 30 year mortgages, take into consideration your other debts. Your mortgage is usually your lowest cost borrowing… and it might be more advantageous to pay down other higher interest rate loans than to try to shorten your morgage loan to a 15 year initially. 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. With this option, consider how long you anticipate being in your home. It wouldn’t make sense to pay points and then move in a year or two.
Get some background before bidding. Before you make an offer on your favorite home, condo, or townhouse, ask us for the research on the most recent sales trends of similar properties in the same neighborhood. Also consider the property’s “days on market” and how recent the seller may have made any price change.