7 Things to know before buying a home
The rocky economy, growing number of foreclosures, and low interest rates make home buying an attractive option. But before you race out to put the first dream house you see into escrow, consider the following seven things you need to know before buying a home.
Now is a good time to buy
"This is an excellent time to buy a home if you have the ability and desire to do so," says Brent Lake, Realtor for London Properties in Fresno, California. "Many sellers are willing to do whatever they can if they think it will get their home sold, so buyers have the leverage to purchase homes below asking price as well as the opportunity to receive concessions like help with closing costs." But that doesn't mean you should grab the first house you see.
The housing market is abundant
According to Lake, most areas of the country have an abnormally high level of homes for sell, which means buyers can take the time to shop around. "This gives buyers an opportunity to compare available homes and find a residence that is right for them," he adds.
Consider bank-owned properties
With the high number of foreclosures on the market, home buyers can take advantage of short-sells. "Short-sells are when someone buys a home, financing a loan for most of the home price, the housing market tanks, the home value plummets, and the owners – for a variety of reasons – can't make the payments," explains Dave Sinton, real estate broker in Bozeman, Montana. "At that point, the bank takes the house and will sell it for whatever it can get, which is a cost benefit for home buyers."
Find a good Realtor or broker
Though you may have to pay a commission to a real estate expert, a qualified Realtor or real estate broker can ultimately save you money. "A broker will know how to negotiate for a lower price – particularly when it comes to short-sells – and he will also be able to point out reasons a particular home is not a good fit for you and your family," says Sinton. "Further, most good brokers will have access to a short-sell listing because they work with lenders all the time."
Approach 'sell by owner' homes with caution
According to Sinton, in many cases, people who "sell by owner" miss the market, meaning they overprice their house and don't really know how to sell it. "If neither party (seller nor buyer) is being represented, it's like the blind leading the blind, which can easily lead to legal complications," he warns. A real estate agent or broker is the best source for home values as well as property defects and other problems that a "sell by owner" home seller may not or will not disclose. If you choose to buy a "sell by owner" home and don't have a Realtor or broker, Sinton recommends going straight to an escrow company and have the proper documents drawn up. "That way, the transaction is contractually correct," he adds.
Interest rates are enticing
Now may be the best time to buy a home because interest rates for mortgages are buyer-friendly. "And while qualifying for a loan may be a little tougher then it was a few years ago, those that do qualify may have the opportunity to enjoy mortgage rates that are historically low," says Lake. For example, interest rates for 30-year fixed-rate mortgages hit a new low, down to 4.69 percent, Freddie Mac announced in June 2010. This is the lowest level since the company started tracking the data in 1971. However, home sells are falling due to uncertainty about the economy, which is a contributing factor in the high inventory of homes available for interested buyers.
When you find the right home for you, finance it carefully. Your loan is critical for your current and future financial security. "First of all, don't overbuy," advises Sinton. You don't want to end up handing your new home to the bank. "Second of all, keep in mind that borrowed money is expensive at any rate." If you can afford to pay $60,000 on a down payment yet the lender is encouraging you to pay $30,000, pay the $60,000. Sinton says, "The larger the down payment, the lower your monthly mortgage payment, the lower the interest rate, and the more money a buyer will save in the long run."
Current economic conditions make buying a house an attractive option for people who have the desire and ability to buy. If you're ready to own, consult with a Realtor or real estate broker, and take the time to survey the housing market to find the perfect home for your family.
Are you ready to buy a home?
Before you call a real estate agent, before you make buying your first home a goal, it's important to get educated. Home buying is both exciting and daunting. To help you evaluate whether you are ready to become a home buyer ask yourself some key questions.