Make sure buying
is for you. Are rents
cheap and homes costly in your city? Are you planning to move in the next year
or two? Is your job looking iffy? If any of these apply, buying might not be a
good move. After all, the days when houses could quickly be flipped for more
money are history. "Real estate is
not as liquid an investment as it was 5 or 10 years ago," cautions Steve
Domber, president of Prudential Serls Prime Properties, a real estate broker
firm operating across New York state and Connecticut. "If you don't feel
that you are going to stay in your job in your current location then consider
renting."
Do a credit check. Cash and good credit are critical to snagging
a bargain home and keeping it. Before you go shopping make sure you have the
cash on hand for a down payment and a mortgage lender who is willing to provide
you with a home loan at an affordable rate.
Get pre-approved by a lender or
mortgage brokers Pre-approval can help expedite the closing of your purchase, a
process that given the current economic climate can take months.
Consider a down payment and the
alternatives. Another
key financial factor is a down payment. Firoved urges real estate newcomers to
cough up 20%, which immediately adds equity to your house and lowers monthly
payments.
"You know you can afford to
buy a home when you have saved enough money to put a down payment," he
says. That down payment also means you can qualify for a loan modification
program down the road if, heaven forbid, you need it.
Many first-timers don't have the
cash to put up 20% of a home's value. No need to worry, says Robert Walters,
chief economist and vice president of the Capital Markets Group for Quicken
Loans. Your mortgage officer should be able to find alternatives that work for
you.
Uncle Sam offers
a handful of government-backed loans with 0% to 3.5% down. Check out the
Federal Housing Administration's loans. Former military members can go through
the Department of Veterans Affairs, and the Department of Agriculture offers
loans through the Rural Development program.
Skirting the
traditional 20% down payment means a mandatory additional expense: private
mortgage insurance. PMI might not seem like a big deal, but it comes with a few
hitches. This insurance typically costs between 0.5% to 1% of the entire loan
amount on an annual basis. In other words, a $150,000 loan at a 1% insurance
rate adds an extra $125 per month to your bills. The insurance protects your
lender against the possibility of you defaulting on the property and can be
charged until as much as 50% of the loan is paid off. The good news is PMI is
tax deductible for married couples jointly making up to $110,000.
Skirting the
traditional 20% down payment means a mandatory additional expense: private
mortgage insurance. PMI might not seem like a big deal, but it comes with a few
hitches. This insurance typically costs between 0.5% to 1% of the entire loan
amount on an annual basis. In other words, a $150,000 loan at a 1% insurance
rate adds an extra $125 per month to your bills. The insurance protects your
lender against the possibility of you defaulting on the property and can be
charged until as much as 50% of the loan is paid off. The good news is PMI is
tax deductible for married couples jointly making up to $110,000.
"One of the
biggest mistakes first-time home buyers make is they don't leave themselves
with enough money," cautions Walters.
Don't cut corners on inspections. Always cough up the extra cash for a good
home inspection, especially if you're buying a foreclosed home.
"A home inspection is
key...to really understanding the condition a home is in," stresses
Domber.
Follow these steps and you could
be in a place of your own that provides happy, lucrative returns for years to
come. Says Walters: "I think that 20, 30, 40 years from now we'll see that
this was potentially one of the best times in modern history for a first-time
home buyer to purchase a home."
Always ask the expert! http://www.homesacrossalaska.com/
The Clinton Peterson Group
Office: 907-864-6524
Fax: 888-460-7845
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