MONDAY, AUGUST 30, 2010
Are You Ready to Buy? The 10 Basics of Buying and Borrowing
Monday, August 30, 2010
If you’re planning to take advantage of the low interest rates, here are ten things to keep in mind as you begin the buying process:
1) Enlist the help of professionals. In this volatile housing market, a good real estate agent and a good mortgage professional are vital to the home-buying process. Before you do anything else, make sure you have qualified professionals on your side.
2) Do your research. Make sure you thoroughly research different neighborhoods, school districts, types of homes, comparable sales, crime statistics, etc. Your real estate agent is your best source for information.
3) Make a housing budget. Although any budget you make will more than likely change over time, you’ll want to have a good idea of what you can afford in terms of a mortgage, general housing expenses, and other unexpected expenses.
4) Get a pre-approval. If you know ahead of time exactly how much you can afford, you’ll be much better prepared. Also, the seller will see that you’re ready to buy and that you have the backing of a lender.
5) Make sure your credit is good. Credit scores are more important now than ever. Consult with your mortgage professional to see how you can improve your credit before you buy.
6) Don’t change your financial situation. Major changes in your financial status—such as buying a new car or changing jobs—will affect your credit profile so try to maintain your current spending and cash inflows.
7) Look for what you can afford. As a general rule, your monthly mortgage payment shouldn’t exceed 28 percent of your gross monthly income. Don’t get in over your head by taking on a mortgage that you may not be able to afford.
8) Don’t overbuy. Don’t buy a house that is larger than you need. Not only will your monthly mortgage payments be higher, but your housing expenses—cleaning, upkeep, repairs, landscaping, etc.—will be higher as well.
9) Location is the key. The old saying about location is still true today. Location should be at the top of your list when you start your home search. Think about how specific areas will change in the next 10-20 years and how those changes will affect your home and its resale value.
10) Don’t try to wait out the market. Don’t gamble on interest rates and home prices because the experts are often wrong. If you’re ready to buy a home, don’t wait around. Interest rates and housing prices are affordable right now.
Although these ten basic guidelines are very general, if you take them to heart, you’ll be much more likely to have a relatively pain-free home-buying experience.
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