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SHOPPING FOR A LOAN
| 9 WAYS TO SAVE MONEY
BUYING A HOME
AVOIDING HOME EQUITY SCAMS
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Experts would say now, if you meet most of the following criteria, you
are ready to buy a home:
Are not counting on price appreciation in the short term. Most experts
don’t expect home prices to inflate much in the next couple of years;
Can afford the monthly payments;
Plan to stay in the house long enough for the appreciation to cover your
transaction costs. The costs of buying and selling a home include real
estate commissions, lender fees and closing costs that can amount to
more than 10% of the sales price;
Need a tax break - The mortgage interest deduction can make home
ownership very appealing;
Prefer to be an owner rather than a renter;
Can handle the maintenance expenses and headaches;
Are not greatly concerned by dips in home values.
Knowing how to figure what you can afford to buy
Roughly, it’s three times your annual income. Real estate experts
strongly recommend people get pre-qualified by a lender as a way of
calculating exactly how much of a home they can afford. When qualifying
people for a loan, lenders look at a borrower’s full financial standing.
Lenders use the relationship P1TI, or principal, interest, taxes and
insurance payments, and their gross monthly income. Generally, lenders
like to see the PITI not exceed 30% to 33% of the borrower’s gross
monthly income. They also consider the ratio of the borrower’s monthly
debt payments, including the PITI to income. Some lenders have
flexibility in these qualifying ratios.
Knowing if it is better to make a large or small down payment
Putting down as little as possible and taking a larger mortgage allows
buyers to take full advantage of the tax benefits of homeownership.
Mortgage interest (and property taxes) is fully deductible from state
and federal income taxes.
Knowing if you can buy a house with nothing down
Although some experts advise against it, home buyers interested in
buying a house with nothing down can do so. But it’s not easy finding
these loans and in some cases they can be risky. Occasionally, a builder
will offer ‘nothing-down’ loans to induce sales in an otherwise
slow-moving project. Desperate sellers also may agree to finance the
full purchase price to get out from under a property.
Knowing what the standard contingencies in a purchase offer are
Most real estate purchase contracts include at least two contingencies:
A financing contingency makes the purchase conditional on the buyers´
ability to obtain a loan commitment from a lender
An inspection contingency allows the buyers to have professionals
Inspect the property to their satisfaction.
Knowing if you can get a home loan with bad credit
A poor credit history makes it harder to qualify for a mortgage. There
are numerous types of credit report problems that cause a lender to
reject a loan application, says Ilyce R. Glink in ‘100 Questions Every
First-Time Home Buyer Should Ask’ (Random House). Here are a few
thoughts before you apply for a mortgage:
If you’ve ever missed a credit card payment, or defaulted on a prior
mortgage or school or car loan, it will probably show up on your credit
report;
If you’ve filed for bankruptcy within the past seven years, that will
show up on your credit report
If you haven’t paid your taxes, or there has been a judgment filed
against you (perhaps for non-payment of spousal or child support), it
will also show up on your credit report:
Failure to pay your landlord, doctor or hospital may turn into a black
spot on your credit report.
Knowing how you can find out what your credit report says about you
Anyone concerned about their credit history can order a copy of their
own report by calling the three main national credit reporting agencies:
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Apply for your credit
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Knowing if sellers will consider only offers close to, or at, full price
While a very low offer in a normal market might be rejected immediately,
in a buyer’s market the below-market offer will usually either be
accepted or generate a counteroffer.
“When few offers are being made, an outright rejection of offers becomes
unlikely,”
writes William H. Pivar, in “Real Estate Investing From A to Z (Probus
Publishing) Pivar also said,
“There are always some sellers who for some reason must sell quickly and
will consider a reduced price.”
There are other considerations :
Is the offer contingent upon anything such as the sale of the buyer’s
current house?
If the offer made on the house ‘as is,’ or does the buyer want the
seller to make some repairs before close of escrow?
Is the offer all cash? A cash offer at less than the asking price may be
more attractive to the seller than a full-price offer with a financing
contingency.
Knowing how to find a good real estate agent
Here are some tips for finding an agent suggested by author Dian Hymer:
“The best sources of contacts are friends or associates who have bought
or sold recently and can recommend agents. Be sure to ask your
colleagues if they would use the agent again.”
“If personal contacts don’t generate enough leads, call the managers of
reputable local real estate companies and ask for recommendations of
agents who specialize in your neighborhood if you’re selling.”
“Find out if the agent works full time at real estate and how much
experience the agent has.”
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SHOPPING FOR A LOAN
| 9 WAYS TO SAVE MONEY
BUYING A HOME
AVOIDING HOME EQUITY SCAMS
|
|
|
 |
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