 1.
Knowing when to buy your home
Experts would say now, if you meet the following criteria:
• 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.
2. 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.
3. 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.
4. Knowing if you can buy a house
with nothing down
Although some experts advise against it, homebuyers 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.
5.
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.
6. 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.
If you’ve ever missed a credit card payment, defaulted
on a prior mortgage, 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. Failure to pay your landlord, doctor
or hospital may turn into a black spot on your credit
report
7. 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: Equifax (800) 685-1111, TRW
(800) 392-1122 or Trans Union (317) 408-1050.
8. 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. 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.
9. Knowing how to find a
good real estate agent
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. Word of caution: Number of years
experience alone does not equate to a good real estate
agent.
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