Nothing is more important at the beginning of your home search than establishing the price parameters for your search. In most cases, that means determining how much of a mortgage you can afford. Here are a few tips for dealing with the dollars and cents so that you can pursue, purchase, and enjoy that new home.
Get pre-approved. Before you begin looking seriously for a new home, visit with your lender—or a handful of lenders—to get pre-approved. By getting pre-approved as a buyer, you can save yourself the grief of falling in love with houses you can’t afford. You can also put yourself in a better position to make a serious offer when you do find the right house. Unlike pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head.
Choose your mortgage carefully. In years past, the emphasis when it came to mortgages was on paying them off as soon as possible. Today, with the average debt a person will accumulate via credit cards, student loans, etc. means it may be advantageous to opt for the 30-year mortgage instead of the 15-year. This way, you have a lower monthly payment, with the option of paying an additional principal when money is good. Additionally, when picking a mortgage, you usually have the option of paying additional points (a portion of the interest that you pay at closing) in exchange for a lower interest rate. If you plan to stay in the house for a long time, paying the points could well save you money over time.
Do your homework before offering. Before you make an offer on a home, we research the sales trends of similar homes in the neighborhood via our MLS. We consider especially sales of similar homes in the last three months. For instance, if homes have been selling for an average of 5 percent below the asking price, and we believe the house is priced for the market, your initial offer we recommend might be around 8 to 10 percent lower than what the seller is asking.
There are many more facets of the mortgage loan process to learn about before you buy. Contact us for more information. We can put you in touch with a number of reputable local lending institutions that will fit you with the best home loan for your needs. There are myriad programs for a wide range of home buying scenarios, from no- or low down payment options, to investor loans, and loans tailored to specific professions. We’re happy to help you get connected!