Buying Secret #10: Keep Your Money Where It Is… Just Say NO to those big ticket items.
It’s not wise to make any huge purchases or move your money around anywhere from three to six months before buying a new home. Why? You don’t want to take any big chances with your credit profile. Lenders need to see that you’re reliable and they want a complete paper trail so that they can get you the best loan possible. If you open new credit cards, amass too much debt or buy a lot of big-ticket items, you’re going to have a hard time getting a loan. Case in point: Buyer was all accepted for the mortgage, got the best price on the house, and was down to the final CREDIT check that banks run just prior to issuing the closing documents. Guess what? Buyer’s wife had signed as a CO-signer on her little brother’s new car purchase… and the bank said NO to the LOAN because it changed the loan to debt ratio for buyers. What a heartbreak for the first time home buyers, and to the seller who had basically put all her financial “eggs” in this buyer’s basket. It devastated both sides of the deal.
Buying Secret #9: Get Pre-Approved for Your Home Loan… Make the commitment, send in the paperwork, and do everything just short of a contract to submit.
There’s a big difference between a buyer being pre-qualified and a buyer who has a pre-approved mortgage. Anybody can get pre-qualified for a loan. Getting pre-approved means a lender has looked at all of your financial information and they’ve let you know how much you can afford and how much they will lend you. Being pre-approved will save you a lot of time and energy so you are not running around looking at houses you can’t afford. It also gives you the opportunity to shop around for the best deal and the best interest rates. A pre approved buyer has muscles, just like cash buyers do as well! Do your research: Learn about junk fees, processing fees or points and make sure there aren’t any hidden costs in the loan.
Buying Secret #8: Avoid a Border Dispute… if you are purchasing a home you need this.
It’s absolutely essential to get a survey done on your property so you know exactly what you’re buying. Knowing precisely where your property lines are may save you from a potential dispute with your neighbors. Also, your property tax is likely based on how much property you have, so it is best to have an accurate map drawn up.
Buying Secret # 7: Don’t Try to Time the Market… there is NO magic globe on this.
Don’t obsess with trying to time the market and figure out when is the best time to buy. Trying to anticipate the housing market is impossible. The best time to buy is when you find your perfect house and you can afford it. Real estate is cyclical, it goes up and it goes down and it goes back up again. So, if you try to wait for the perfect time, you’re probably going to miss out. Besides, it is smart purchasing to buy the house who love and then sit on it while that cycle ticks up for appreciation. I’d rather sell at a little bit of a loss in appreciation if I’m buying the house I’d rather be living in while it is appreciating.
Buying Secret # 6: Bigger Isn’t Always Better … neighborhood or end use has it’s place as well.
Everyone’s drawn to the biggest, most beautiful house on the block. But bigger is usually not better when it comes to houses. There’s an old adage in real estate that says don’t buy the biggest, best house on the block. The largest house only appeals to a very small audience and you never want to limit potential buyers when you go to re-sell. Your home is only going to go up in value as much as the other houses around you. If you pay $500,000 for a home and your neighbors pay $250,000 to $300,000, your appreciation is going to be limited. Sometimes it is best to is buy the worst house on the block, because the worst house per square foot always trades for more than the biggest house. If you buy a good sized footprint of a home, and then maximize the value through adding new finishes and fixtures; landscaping and even some architectural details.
Buying Secret #5: Plan for those “Sleeper” costs….hidden things that renters don’t always consider.
The difference between renting and home ownership is the sleeper costs. Most people just focus on their mortgage payment, but they also need to be aware of the other expenses such as property taxes, utilities and homeowner-association dues. New homeowners also need to be prepared to pay for repairs, maintenance and potential property-tax increases. Make sure you budget for sleeper costs so you’ll be covered and won’t risk losing your house. It’s a good rule of thumb to put away at least one month’s house payment a year in a maintenance savings account. Don’t touch it for anything but actual home maintenance costs. In the event of a big rainy day repair, you will have it covered.
Buying Secret #4: You’re Buying a House – Not Dating It
Buying a house based on emotions is just going to break your heart. If you fall in love with something, you might end up making some pretty bad financial decisions. There’s a big difference between your emotions and your instincts. Going with your instincts means that you recognize that you’re getting a great house for a good value. Going with your emotions is being obsessed with the paint color or the backyard. It’s an investment, so stay calm and be wise. Everything about the house can change, except the LOCATION.
Buying Secret #3: Give Your House a Physical… just for your own peace of mind.
Would you buy a car without checking under the hood? Of course you wouldn’t. Hire a home inspector. It’ll cost about $200 but could end up saving you thousands. A home inspector’s sole responsibility is to provide you with information so that you can make a decision as to whether or not to buy. It’s really the only way to get an unbiased third-party opinion. If the inspector does find any issues with the home, you can use it as a bargaining tool for lowering the price of the home. It’s better to spend the money up front on an inspector than to find out later you have to spend a fortune. Licensed Home Inspectors charge anywhere from $500.00-$1000.00 to do a report, but it is money well spent in the long run.
Your opening bid should be based on two things: what you can afford (because you don’t want to outbid yourself), and what you really believe the property is worth. Make your opening bid something that’s fair and reasonable and isn’t going to totally offend the seller. A lot of people think they should go lower the first time they make a bid. Always put your BEST Offer first. If you are going to feel “sick to your stomach” because you lost the bid for a $10,000 shortfall, it is not worth it to try to low ball the seller. Think of it this way, $10,000.00 is actual money out of the seller’s pocket. It is just a number to the buyer who has a mortgage. The statistics show that most homebuyers DO NOT keep their house for 30 years, they will never pay off the mortgage, and certainly that $10,000.00 will not be a part of that. Keeping that in mind puts the bid in perspective, and It all depends on what the market is doing at the time. You need to look at what other homes have gone for in that neighborhood and you want to get an average price per square foot. If the market is super competitive, so must you be. Sizing up a house on a price-per-square-foot basis is a great equalizer. Also, see if the neighbors have plans to put up a new addition or a basketball court or tennis court, something that might detract from the property’s value down the road. **Sellers respect a bid that is an oddball number and are more likely to take it more seriously. A nice round number sounds like every other bid out there. When you get more specific the sellers will think you’ve given the offer careful thought.Buying Secret #1: Stalk the Neighborhood…during the evening, the afternoon and the morning.
Before you buy, get the lay of the land – drop by morning noon and night. Many homebuyers have become completely distraught because they thought they found the perfect home, only to find out the neighborhood wasn’t for them. Drive by the house at all hours of the day to see what’s happening in the neighborhood. Do your regular commute from the house to make sure it is something you can deal with on a daily basis. Find out how far it is to the nearest grocery store and other services. Even if you don’t have kids, research the schools because it affects the value of your home in a very big way. If you buy a house in a good school. the value can be affected as much as 20 percent. In a city, the distance to the train, or bus station makes a huge impact. Are there plenty of walkable stores and restaurants? Make sure your lifestyle will be happy in the new location.