Dealing with Financing

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The first step after contacting a real estate professional is to get pre-approved by a lender to know how much home you can afford.

Get pre-approved.  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 and know what your payments are most likely to be.

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 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 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. This means you can BUY DOWN YOUR INTEREST RATE!!!!

Do your homework before bidding. Before you make an offer on a home, do some research on the sales trends of similar homes in the neighborhood with sites like homesnap. 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.

 

Your Realtor should provide you with comps to justify purchase price, or to advise you to offer a different price based on the market, the home and other recent sales in the area.