Asthe events of the last few years in the real estate industry show, peopleforget about the tremendous financial responsibility of purchasing a home attheir peril. Here are a few tips for dealing with the dollar signs so that youcan take down that “for sale” sign on your new home.
Getpre-approved. Sub-primes may be history, but you’ll probably still be shownhomes you can’t actually afford. By getting pre-approved as a buyer, you cansave yourself the grief of looking at houses you can’t afford. You can also putyourself in a better position to make a serious offer when you do find the righthouse. Unlike pre-qualification, which is based on a cursory review of yourfinances, pre-approval from a lender is based on your actual income, debt andcredit history. By doing a thorough analysis of your actual spending power,you’ll be less likely to get in over your head.
Chooseyour mortgage carefully. Used to be the emphasiswhen 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 anadditional principal when money is good. Additionally, when picking a mortgage,you usually have the option of paying additional points (a portion of theinterest that you pay at closing) in exchange for a lower interest rate. If youplan to stay in the house for a long time—and given the current real estatemarket, you should—taking the points will save you money.
Do yourhomework before bidding. Before you make an offer on ahome, do some research on the sales trends of similar homes in the neighborhoodwith sites like Zillow. Consider especially sales of similar homes in the lastthree months. For instance, if homes have recently sold for 5 percent less thanthe asking price, your opening bid should probably be about 8 to 10 percentlower than what the seller is asking.