As the events of the last few years in the real estate industry show, people forget about the tremendous financial responsibility of purchasing a home. Here are a few tips that will help you get through the settlement process...
Get pre-approved. By getting pre-approved as a buyer, you can put yourself in a better position to make a serious offer when you do find the right house. Pre-approval from a lender is based on your income, debt and credit history. By doing a thorough analysis of your actual spending power, you’ll be more likely to find the perfect fit within your ideal budget.
Choose your mortgage carefully. Used to be the emphasis when it came to mortgages was on paying them off as soon as possible. Today, the debt the average person will accumulate due to credit cards, student loans, etc. means it’s better 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—and given the current real estate market, you should—taking the points will save you money.
Do your homework before bidding. Consider especially sales of similar homes in the last three months. For instance, if homes have recently sold for 5 percent less than the asking price, your opening bid should probably be about 8 to 10 percent lower than what the seller is asking.
