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10 Steps to Home Ownership!
Systematic steps to help you buy
your home
1. Are You
Ready?
Knowledge and experience are the keys to
successful real estate transactions. This site contains an
enormous amount of valuable information, and such data -- combined
with the expertise, experience and training of local can be the
essential keys to your success.
One of the keys to making the homebuying
process easier and more understandable is planning. In doing so,
you'll be able to anticipate requests from lenders, lawyers and a
host of other professionals. Furthermore, planning will help you
discover valuable shortcuts in the homebuying process.
Do You Know What You Want?
Whether you are a first-time homebuyer or entering the marketplace
as a repeat buyer, you need to ask why you want to buy. Are you
planning to move to a new community due to a lifestyle change or
is buying an option and not a requirement? What would you like in
terms of real estate that you do not now have? Do you have a
purchasing timeframe?
Whatever your answers, the more you know
about the real estate marketplace, the more likely you are to
effectively define your goals. As an interesting exercise, it can
be worthwhile to look at the questions above and to then discuss
them in detail when meeting with local REALTORS®.
Do You Have The Money?
Homes and financing are closely intertwined. (Financing is the
difference between the purchase price and the downpayment,
commonly referred to as debt or the mortgage.) The good news is
that over the years new and innovative loan programs have evolved
which require a 5 percent downpayment or less. In fact, a number
of programs now allow purchasers to buy real estate with nothing
down.
In addition to a down payment, purchasers
also need cash for closing costs (the final costs associated with
closing the loan). Several newly emerging loan programs not only
allow the purchase of a home with no money down, but also
underwrite closing costs.
Not everyone, however, elects to purchase
with little or no money down. Less money down means higher monthly
mortgage payments, so most homebuyers choose to buy with some cash
up front.
As to closing costs, in markets where buyers
have leverage, it may be possible to negotiate an offer for a home
that requires the owner to pay some or all of your settlement
expenses. Speak with local REALTORS® for details.
Is Your Financial House in Order?
Those great loans with little or nothing down are not available to
everyone: You need good credit. For at least one year prior to
purchasing a home, you should assure that every credit card bill,
rent check, car payment and other debt is paid in full and on
time.
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Check out these 10 things to
avoid in your home finances
Most advice columns tell you how you
should do things. But there are all kinds of things you
shouldn't do, either. Here are 10 frequent financial
mistakes that consumers routinely make -- and you should
avoid.
Don't:
- Choose
the Wrong Mortgage: With the advent of instant
refinancing, home loans are no longer the lifetime
obligations they used to be. Still, you don't want to be
saddled for even a short period of time with the wrong
one. Investigate all your options, then lay your choices
side-by-side and do the math, making sure to compare
worst-case scenarios. Be sure to look at initial
interest rates, future interest rates and payments (if
different), and the possibility of prepayment penalties.
-
Confuse "Pre-Approved" and "Pre-Qualified" with a Loan
Commitment: These are debatable terms in real
estate because not all lenders apply the same definition
to each expression. In fact, one leading real estate
dictionary contains neither expression because their
definitions are uncertain. According to one school of
thought, however, when you are "pre-qualified," the
lender is making an educated guess about how much you
can borrow based on information you've provided. When
you are "pre-approved," the lender has verified
everything you have told him or her and is offering to
lend you up to a given amount at current interest rates
-- under certain conditions. Whether pre-qualified or
pre-approved, final clearance and a check at closing --
a loan commitment -- are subject to an appraisal
satisfactory to the lender, good title, a last-minute
credit check, and other verifications. When meeting with
lenders, always ask how they define each term and what
additional steps will be required to obtain a loan.
- Have
Too Much Credit: Excessive credit is almost as
bad as no credit or even bad credit. Even if you pay
your bills on time, lenders tend to focus just as much
on how much credit you have available to you as they do
on timeliness. So being up to your ears in car loans and
credit cards is a sure way to be turned down for a
mortgage. Postpone any big ticket purchases until after
you buy your house.
- Lie on
Your Loan Application: Exaggerating your income
on a mortgage application or putting down other untruths
can be a federal offense. Lenders rarely prosecute
liars. But if they find out later, they can call your
loan due and payable. Don't ever sign your name to a
loan application that is not completely filled out,
either. Loan officers have been known to stretch the
truth to get a client approved, but it's the borrower
who ends up paying the price, often in the form of
monthly loan payments he can't afford.
- Hide
If You Can't Make Your Payments: The worst thing
you can do is ignore phone calls and letters from your
lender when you are behind on your payments. Lenders
have many options at their disposal to help keep
borrowers from losing their homes to foreclosure. But
they can't do anything for you unless they can talk to
you about your difficulties. Lenders are the enemy only
if you give them no other choice.
- Skip a
Home Inspection: Failing to make your purchase
contingent on a satisfactory home inspection could be a
costly mistake. Independent home inspectors examine
houses from stem to stern. They'll be able to tell you
whether the roof and/or basement leaks, whether the
mechanical systems are in good shape and how long the
appliances should last. They can't report on things they
can't see, but at least their trained eyes are better
than yours. So don't pass just to save $300-$400; that's
money well spent.
- Hire
Just Any Agent to Sell Your House: All real
estate agents are not the same. You want to look for
those who specialize in your neighborhood and are top
producers. Ask your candidates how they plan to market
your house, what you can do to make the place more
attractive to prospects and how much you should ask. If
you don't like any of the answers, looks elsewhere. And
above all, stay away from relatives. Unless Aunt Bessie
or Nephew Nick fit the description above, keep looking.
- Fail
to Check Out a Remodeler: Never, ever hire a
contractor who knocks on your door or says his prices
are good for only a few days. Reputable remodelers don't
solicit door-to-door, and they don't cut prices just
because they happen to be in your neighborhood. Check
out a potential contractor thoroughly by calling several
of his past clients, your local better business bureau,
his bankers and suppliers, and your local consumer
affairs agency.
- Pay
Too Much Upfront: If a contractor asks for more
than a third of the contract price as a downpayment,
chances are something's wrong. At worst, he's a scam
artist who has no intention of returning after he cashes
your check. At best, he's undercapitalized and can't
afford to purchase materials on his own. Or, in between,
he could be using your money to pay workers on another
job. Never give a contractor cash, either.
- Burn
Your Mortgage: It's a wonderful feeling when you
make your last house payment. After all, the place is
now yours, all yours. Many people celebrate by holding a
mortgage burning party. But they torch the original
document. Don't. Make a copy and burn that instead. Keep
all your loan docs in a safe place.
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